Firm Valuation (v3) The Obermann family privately owns what has historically been a very successful incorporated...

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Firm Valuation (v3) The Obermann family privately owns what has historically been a very successful incorporated enterprise. Due to the recent pandemic crisis however the last year has proven to be very difficult and as a result the family has decided it might be For 2020 the Obermann enterprise reported the following income statement and balance sheet (in $000s): Obermann Inc. Income Statement Obermann Inc. Balance Sheet For the year ended December 31, 2020 (in S000s) at December 31, 2020 (in So00s) Cash $6,150 $ 825 $1,200 Sales Cost of sales Accounts payable Accounts receivable Inventory Accrued liabilities Bank loan 2,153 2.945 900 Selling, general, and admin exper Depreciation 3,000 1,000 8,590 Total Liabilities and E $14,690 405 1,050 890 Investments 450 Common shares Retained earnings Property, plant, and i Total Assets Interest 285 9,420 Net income before taxes 2,418 $14,690 Income taxes 556 Net income $1,862 Additional financial information: 1. Sales in 2020 were 40% lower than previous years and are expected to grow slowly in the near future before growing sufficiently to return to pre-pandemic levels. Sales growth rates are expected to be: 5% in 2021, 12% in 2022, 35% in 2023, and 2. Cost of sales as a percentage of sales will remain constant at 35% of sales. 3. Selling, general and admin expenses as a percentage of sales will be 9% in 2021 and 2022 and will remain stable at 12% after that. 4. Depreciation is expected to remain at its current level and is equal to capital cost allowance. 5. The income tax rate is expected to remain at its current rate. 6. Capital expenditures are expected to be $0.50 million in 2022 as some of the equipment will require replacement and then will remain stable at $0.25 million after that. 7. Working capital varies directly with sales. Working capital at the end of 2020 was $2,720. 8. Assume that the 2025 free cash flow will increase by 3.5% over the 2024 free cash flow and will grow at this rate in perpetuity. 9. The bank loan is considered a permanent part of the capital structure and carries an interest rate 4.25%. 10. The firm's common shares were issued when the business was first formed, and no shares had been issued or re-purchased since that time. At that time a total of 100,000 shares were issued to the family members. 11. The familys financial adviser has estimated that the beta of similar public corporations is 1.75, and trade at $80.50 per share. Government bonds are currently yielding 0.25%, and the market rate of return is 3.95%. Required: Complete the tables below and estimate the value of the firm at the end of 2020. Round all dollar amounts to the nearest whole dollar and all percentages to two decimal places (e.g. 25.25%) but DO NOT enter precent or dollar signs into cells. Funding source Cost Weight WACC Firm Valuation Components Enter to nearest dollar in $00s S0 (kbank; kequity) (same scale as problem data) Bank Answer% Answer% Answer% Sum of discounted cash flov SAnswer Common shares Answer% Answer% Answer% Terminal value Answer 100.00% Answer% Total firm value SAnswer Firm Valuation (v3) The Obermann family privately owns what has historically been a very successful incorporated enterprise. Due to the recent pandemic crisis however the last year has proven to be very difficult and as a result the family has decided it might be For 2020 the Obermann enterprise reported the following income statement and balance sheet (in $000s): Obermann Inc. Income Statement Obermann Inc. Balance Sheet For the year ended December 31, 2020 (in S000s) at December 31, 2020 (in So00s) Cash $6,150 $ 825 $1,200 Sales Cost of sales Accounts payable Accounts receivable Inventory Accrued liabilities Bank loan 2,153 2.945 900 Selling, general, and admin exper Depreciation 3,000 1,000 8,590 Total Liabilities and E $14,690 405 1,050 890 Investments 450 Common shares Retained earnings Property, plant, and i Total Assets Interest 285 9,420 Net income before taxes 2,418 $14,690 Income taxes 556 Net income $1,862 Additional financial information: 1. Sales in 2020 were 40% lower than previous years and are expected to grow slowly in the near future before growing sufficiently to return to pre-pandemic levels. Sales growth rates are expected to be: 5% in 2021, 12% in 2022, 35% in 2023, and 2. Cost of sales as a percentage of sales will remain constant at 35% of sales. 3. Selling, general and admin expenses as a percentage of sales will be 9% in 2021 and 2022 and will remain stable at 12% after that. 4. Depreciation is expected to remain at its current level and is equal to capital cost allowance. 5. The income tax rate is expected to remain at its current rate. 6. Capital expenditures are expected to be $0.50 million in 2022 as some of the equipment will require replacement and then will remain stable at $0.25 million after that. 7. Working capital varies directly with sales. Working capital at the end of 2020 was $2,720. 8. Assume that the 2025 free cash flow will increase by 3.5% over the 2024 free cash flow and will grow at this rate in perpetuity. 9. The bank loan is considered a permanent part of the capital structure and carries an interest rate 4.25%. 10. The firm's common shares were issued when the business was first formed, and no shares had been issued or re-purchased since that time. At that time a total of 100,000 shares were issued to the family members. 11. The familys financial adviser has estimated that the beta of similar public corporations is 1.75, and trade at $80.50 per share. Government bonds are currently yielding 0.25%, and the market rate of return is 3.95%. Required: Complete the tables below and estimate the value of the firm at the end of 2020. Round all dollar amounts to the nearest whole dollar and all percentages to two decimal places (e.g. 25.25%) but DO NOT enter precent or dollar signs into cells. Funding source Cost Weight WACC Firm Valuation Components Enter to nearest dollar in $00s S0 (kbank; kequity) (same scale as problem data) Bank Answer% Answer% Answer% Sum of discounted cash flov SAnswer Common shares Answer% Answer% Answer% Terminal value Answer 100.00% Answer% Total firm value SAnswer