The Question tab of the spreadsheet contains the most recent (Year 0) income statement for Flitwick
Question:
The “Question ” tab of the spreadsheet contains the most recent (“Year 0”) income statement for Flitwick Corporation. You’ll need to forecast the next 5 years of the income statement (including the Free Cash Flow) using the following assumptions:
• Sales will grow by 13% each year.
• COGS and SG&A will be forecast using the percent of sales technique.
• Depreciation will grow by 9% each year.
• Interest expense will grow by 11% each year.
• Flitwick’s tax rate is 31%.
• CapEx and Change in NWC will grow by 12% each year.
• At the end of year 5, you will sell the company for $40,000,000 (note: this number should be added to the year 5 free cash flow).
• The appropriate discount rate is 16%. Once you’ve estimated the free cash flows, find the value of the firm (i.e. the present value of the free cash flows.)
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford