Equity valuation Cash Flow Year 2013 Forecast 2014 50,000 200,000 450,000 700,00

Question

Equity valuation Cash Flow Year 2013 Forecast 2014 50,000 200,000 450,000 700,000 300,000 1,000,000 Cash 60,000 290,000 570,000 920,000 380,000 1,300,000 Inventories Total current Asset Fixed assets, net Total Assets Account Payable Accurals Bank Loan 140,000 50,000 80,000 270,000 400,000 50,000 200,000 80,000 1,000,000 180,000 70,000 90,000 340,000 550,000 50,000 200,000 160,000 1,300,000 Total Current Liabilities Long-term Debt Common Stock ($1 par value) Capital Surplus Retained earnings Total Liabilities and equity 1,300,000 780,000 520,000 130,000 150,000 40,000 200,000 45,000 155,000 62,000 93,000 1,600,000 960,000 640,000 160,000 150,000 55,000 275,000 55,000 220,000 88,000 132,000 Net Sales Cogs Gross profit Marketing General and administrative Depreciation EBIT Interes EBT Income Taxes (40%) Net Income

Explanation / Answer

present value of the Global Products venture Operating free cash flow OFCF = EBIT(1-T) + depreciation - CAPEX - D working capital - D any other assets Where: EBIT = earnings before interest and taxes T= tax rate CAPEX = capital expenditure EBIT    200,000 (1-T)= 60%           0.60    120,000 Add depreciation      40,000 Less: Capex(380k-300k)      80,000 Working captial : Increase in Current Asset: 220000 increase in current liabilities: 70000 Net increase in working capital    150,000 Operating free cash flow    390,000 Value of firm = free cash flow/(discount rate- growth rate) 390000/(25%-8%)                                                                   2,294,118

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