The following is a presentation of re-organized financial statements of ABC Limited for the et recent...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The following is a presentation of re-organized financial statements of ABC Limited for the et recent period and five year projections. Figures in million Kenya shillings. ACTUAL PROJECTED 2 3 4 829.44 995.328 103.68 82.94 864| 1036.8 1244.16 1492.99 Non-Current Assets (NET) 400 480 50 576 1. Current Assets Current liabilities 4 Revenues 5 Earnings Before Iaterest & Tax 6 Depreciation and ammonization 691.2 60 72 86.4 124.42 99.53 40 48 57.6 69.12 600 720 100 120 144 172.8 86.4 207.36 103.68 248.83 124.42 50 60 72 Additional information (1) 4.4 Applicable tax rate is 30%. It is expected that after year five (projection), all items except non-current assets (1i) and, depreciation and amortization will grow at an annual rate of 5% each year indefinitely. Investment on capital projects and non-cash charges will off-set each other. (iii) Weighted average cost of capital during high growth stage and stable growth stages has been estimated as 12% and 6% respectively. Required (a) Compute growth rate for the high-growth stage. (5 marks) (b) Compute free cash flow for projected years 1, 2, 3, 4 and 5. (10 marks) (c) Compute the value of ABC Limited given the above information. Using free cash flow to the firm's model. (10 marks) (d) Compute the terminal value of ABC Limited. (5 marks) 23 The following is a presentation of re-organized financial statements of ABC Limited for the et recent period and five year projections. Figures in million Kenya shillings. ACTUAL PROJECTED 2 3 4 829.44 995.328 103.68 82.94 864| 1036.8 1244.16 1492.99 Non-Current Assets (NET) 400 480 50 576 1. Current Assets Current liabilities 4 Revenues 5 Earnings Before Iaterest & Tax 6 Depreciation and ammonization 691.2 60 72 86.4 124.42 99.53 40 48 57.6 69.12 600 720 100 120 144 172.8 86.4 207.36 103.68 248.83 124.42 50 60 72 Additional information (1) 4.4 Applicable tax rate is 30%. It is expected that after year five (projection), all items except non-current assets (1i) and, depreciation and amortization will grow at an annual rate of 5% each year indefinitely. Investment on capital projects and non-cash charges will off-set each other. (iii) Weighted average cost of capital during high growth stage and stable growth stages has been estimated as 12% and 6% respectively. Required (a) Compute growth rate for the high-growth stage. (5 marks) (b) Compute free cash flow for projected years 1, 2, 3, 4 and 5. (10 marks) (c) Compute the value of ABC Limited given the above information. Using free cash flow to the firm's model. (10 marks) (d) Compute the terminal value of ABC Limited. (5 marks) 23
Expert Answer:
Answer rating: 100% (QA)
Net Working Capital Workings Current assets 50 60 72 864 10368 12442 Current Liabilities 40 48 576 6... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
Students also viewed these finance questions
-
The demand function for Einstein Bagels has been estimated as follows: Qx = -15.87 40.73Px + 84.17Py + 0.55Ax Where Qx represents thousands of bagels; Px is the price per bagel; Py is the average...
-
An all-equity-financed firm plans to grow at an annual rate of at least 10%. Its return on equity is 18%. What is the maximum possible dividend payout rate the firm an maintain without resorting to...
-
The demand for haddock has been estimated as log Q = a + b log P + c log I + d log Pm Where Q = quantity of haddock sold in New England P = price per pound of haddock I = a measure of personal income...
-
93) Clay of the Land is a manufacturer of glazed clay pots. Currently, it produces 300 clay pots per month which it sells through nurseries at a constant price of $5 per pot. Current demand for clay...
-
What role should the board of directors have regarding an organization's investment in marketable securities? What documentation would the auditor expect to find regarding the board's oversight role?
-
GA had 5 million $1 ordinary shares in issue at 1 May 2008. On 30 September 2008 GA issued a further 2 million $1 ordinary shares at par. Profit before tax for the year ended 30 April 2009 was $ 650...
-
What is the definition of ethics? AppendixLO1
-
Jetadiah Brown wants to establish a pet store, to be called Jets Pets. Jet thinks there is an opportunity in the south side of the city because he knows that many new subdivisions have been built and...
-
Please write the tick marks next to numbers if possible and label meaning of each tick mark like a legend. Il client provided you with the following bank reconciliation as of December 31, 2019....
-
1. Which process should VBB choose to produce?? 2. How much would VBP be willing to pay for the testing that is currently offered, for each batch?? 3. Would we be considered a perfect test, at twice...
-
It is a common practice for companies to create a proposal evaluation matrix for use in selecting the winning response to an RFP. However, it is also a common practice for companies to try to write...
-
The Tokyo Olympics. After watching how the tokyo olympics became the most expensive summer game ever video answer the following questions. Q 3 : As you saw in the video, the capital investment a city...
-
write at least two paragraphs discussing the experiences of individuals who identify outside the traditional binary gender system (male/female.) Please explore the challenges they face and how...
-
Newly formed S&J Iron Corporation has 163,000 shares of $5 par common stock authorized. On March 1, Year 1, S&J Iron issued 9,000 shares of the stock for $12 per share. On May 2, the company issued...
-
Use the SMOKE for this question. The variable cigs is the number of cigarettes smoked per day. How many people in the sample do not smoke at all? What fraction of people claim to smoke 20 cigarettes...
-
Transcribed image text : Reproduced below from Farthington Supply's accounting records is the accounts receivable subledger along with selected general ledger accounts. Dec. 31/19 Balance Credit...
-
Problem 16-04 Cost of Trade Credit A large retailer obtains merchandise under the credit terms of 3/10, net 40, but routinely takes 55 days to pay its bills. (Because the retailer is an important...
-
A Alkynes can be made by dehydrohalogenation of vinylic halides in a reaction that is essentially an E2 process. In studying the stereochemistry of this elimination, it was found that...
-
What factors influence Colemans composite WACC?
-
What is Project Ls discounted payback, assuming a 10% cost of capital?
-
The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution be for (a) Completely certain returns and (b)...
-
Unincorporated joint operation managed by one of the operators LO4 During 2018, discussions took place between Broken Bay Ltd, a company concerned with the design of specialised tools and...
-
ACCOUNTING FOR AN ASSET USED BY A NUMBER OF COMPANIES Raby Ltd and Bay Ltd are companies that have newly discovered oil wells in a MiddleEastern country. There is some distance to the nearest port...
-
Contribution of plant LO3, 4 On 1 July 2019, Tully Ltd and Cooktown Ltd signed a contractual agreement to form a joint operation for the manufacture of kitchen products. The agreement provided that...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App