Question: Modify Table on the assumption that competition eliminates any opportunities to earn more than WACC on new investment after year 7 (PVGO = 0). How

Modify Table on the assumption that competition eliminates any opportunities to earn more than WACC on new investment after year 7 (PVGO = 0). How does the valuation of Riochange?

TABLE Latest Year 0 Forecast 3 2 4 6 Sales Cost of goods sold EBITDA (1-2) Depreciation Profit before tax (EBIT) (3-4) 83.6 63.1 20.5 89.5 95.8 102.5 76.3 26.1 11.3 106.6 66.2 71.3 23.3 24.4 10.6 13.4 13.8 110.8 115.2 118.7 90.2 27.728.228.5 12.7 13.1 15.4 15.5 15.4 5.4 10.0 87.0 26.6 12.3 17.2 14.9 6 Profit after tax (5-6) B.7 10.0 Investment in fixed assets Investment in working capital Free cash flow 7+4-8-9 14.6 15.516 16.6 15.0 15.6 16.2 15.9 0.8 0.5 0.6 2.5 3.5 PV free cash flow, years 1-6 PV horizon value PV of company 20.3 67.6(Horizon value in year 6) 13.4 87.9 Assumptions: Sales growth, % Costs (percent of sales Working capital (percent of sales) Net fixed assets (percent of sales) Depreciation (percent of net fixed assets) 6.3 75.5 13.3 79.2 4.0 75.0 13.0 79.0 74.0 74.5 13.0 13.0 74.5 13.0 79.0 79.0 79.0 4.0 75.075.76.0 13.0 13.0 13.0 79.0 14.0 79.079.0 14.0 14.0 14.0 14.0 Tax rate, % WACC, % Long-term growth forecast, % 35.0 9.0 Fixed assets and working capital Gross fixed assets Less accumulated depreciation Net fixed assets Net working capital 95.0 29.0 66.0 109.6 125.141.8 60.8 80.9 13.3 8.9 49.5 70.775.6 11.6 12.4 156.8 72.6 84.2 13.9 172.4188.6 204.5 84.997.61107 93.8 144 15.0 15.4 87.5

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