Dyson Plc has just released its financial results for 2020.

Dyson Plc has just released its financial results for 2020. It achieved sales of £1.3bn and expects these to grow at 4% per year. Cash on deposit is £220m, debt is £100m, and has issued 30m shares. Depreciation is expected to remain constant at £100m per year. It is taxed at a rate of 22%.

You estimate the following information:

EBIT is 7% of sales Dyson expects increases in net investment and in net working capital will be 6% and 8% of any increase in sales, respectively. The firm's WACC is expected to be 9%.

(a) Using a free cash flow approach, calculate a fair price for Dyson Plc shares. (60%)

(b) Firms in the same sector are trading in the market at an average Enterprise Value to EBITDA multiple of 8, based on forecasted earnings. In the light of this, calculate a fair price for Dyson Plc shares, and explain the limitations of the use of multiples to value a firm. (40%)


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