A software company which recently shifted its market focus from about 90% of export to a...

 

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A software company which recently shifted its market focus from about 90% of export to a mix of 80% export and 20% domestic business strategy. One of the reasons for the shift in the business mix is because of better adoption of technology by domestic companies and the second being higher volatility in the currency. Following are the old and new financials. <o:p></o:p> In billion INR <o:p></o:p> Sales EBIT NOPAT Depreciation CAPEX Working capital Old 800 240 192 10 40 120 New 900 250 200 15 50 162 Compute the free cash flow under both situations. In both situations the company had a WACC of 10%. Beyond this year, the free cash flow is expected grow at 5% till infinity. Compute the original and revised value of the company. According to you (based on the above numbers and your valuation) what would have been the reason for increase/decrease in the value because of the new business strategy. A software company which recently shifted its market focus from about 90% of export to a mix of 80% export and 20% domestic business strategy. One of the reasons for the shift in the business mix is because of better adoption of technology by domestic companies and the second being higher volatility in the currency. Following are the old and new financials. <o:p></o:p> In billion INR <o:p></o:p> Sales EBIT NOPAT Depreciation CAPEX Working capital Old 800 240 192 10 40 120 New 900 250 200 15 50 162 Compute the free cash flow under both situations. In both situations the company had a WACC of 10%. Beyond this year, the free cash flow is expected grow at 5% till infinity. Compute the original and revised value of the company. According to you (based on the above numbers and your valuation) what would have been the reason for increase/decrease in the value because of the new business strategy.

Answer rating: 100% (QA)

To calculate the free cash flow FCF and the value of the company under both the old and new business strategies we can follow these steps Calculate NO... View the full answer