Question: (ALL WORK MOST BE DONE IN EXCEL)(SHOW YOUR WORK) You have taken a job with BlueComm, a telecommunications company, as a financial analyst in their
(ALL WORK MOST BE DONE IN EXCEL)(SHOW YOUR WORK)
You have taken a job with BlueComm, a telecommunications company, as a financial analyst in their corporate finance department. As your first assignment, your boss has asked you to complete a free cash flow and corporate valuation of BlueComm. You have been provided with the following projected financial statements for BlueComm for the fiscal years ending July 31 ($ in 000s):
| Projected Earnings | |||
| 2021 | 2022 | 2023 | |
| Sales | $825.0 | $885.6 | $938.6 |
| Less: Operating Costs | (632.5) | (695.8) | (737.5) |
| Operating Income (EBIT) | 192.5 | 189.8 | 201.1 |
| Less: Interest Expense | (36.2) | (39.8) | (41.1) |
| Earnings before taxes (EBT) | 156.3 | 150.0 | 160.0 |
|
| |||
| Depreciation included in operating costs | 60.0 | 65.0 | 69.0 |
| Current Assets | 323.0 | 354.0 | 375.0 |
| Current Liabilities | 196.0 | 215.0 | 228.0 |
| Capital Expenditures | 120.0 | 90.0 | 65.0 |
In addition, your boss provided you with the following assumptions ($ in 000s):
- BlueComms tax rate is 39%
- BlueComms 2020 Net Working Capital was $105.0
- BlueComm expects its 2023 free cash flow to grow at 3.5 percent in perpetuity; and
- BlueComms WACC is 12.0 percent;
Based upon the above information:
a) Prepare a Free Cash Flow for each projected year (2021 thru 2023)
b) Calculate the business value of the company
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