P19-16 (similar to) Question Help Approximately what expected future long-run growth rate would provide the same EBITDA multiple in 2010 as ldeko has in 2005 (i.e 9.1 )? Assume that the future debt-to-value ratio is held constant at 40%; the debt cost of capital is 6.8%; ldeko's market share will increase by 0.40% per year until 2010: investment, financing, and depreciation will be adjusted accordingly (see projected capital expenditures here); and the projected improvements in working capitaldo not occur, so the numbers in the table remain at their 2005 levels through 2010 (that is, Ideko's working capital requirements through 2010 will be as shown hereEEB). The projected free cash flows and continuation values are shown hereand here, respectively. Assume that ldeko's unlevered cost of capital is 12.04%. Assume an income tax rate of 35%. The expected future long-run growth rate would be %. (Round to two decimal places.) (Click on the Icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Ideko Capital Expenditure Assumptions ($ 000) 2005 52,000 4,950 (5,695)(5,621) (5,553)(5,493) 51,255 2007 50,584 4,950 2010 48,949 19,350 2006 51,255 4,950 2008 49,981 4,950 2009 49,438 4,950 (5,439)(6,830) 48,949 Opening Book Value New Investment Depreciation Closing Book Value 50,584 49,981 49,438 61,469 Print Done (Click on the Icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet) Ideko's Working Capital Requirements Working Capital Days Assets >2005 Days 90 45 45 30 2005 Days 90 45 45 30 Based on: Sales Revenue Raw Materials Costs Raw MaterialsLabor Costs Sales Revenue Accounts Receivable Raw Materials Finished Goods Minimum Cash Balance Liabilities 15 45 Direct Labor Admin Costs Wages Payable Other Accounts Payable 45 Raw Materials + Sales and Marketing Working Capital ($ 000) 2006 2007 2010 2005 2008 2009 Assets 17,285 20,133 2,198 4,711 6,711 29,236 33,753 Accounts Receivable Raw Materials Finished Goods Minimum Cash Balance 22,424 24,941 27,705 2,950 6,627 9,235 30,739 3,245 7,409 10,246 51,639 2,034 4,155 5,762 2,678 5,921 8,314 37,612 41,854 46,517 2,428 5,285 7,475 Total Current Assets Labilities 1,512 4,469 Wages Payable 1,237 1,340 1,662 1,825 2,052 5,142 5,763 3,425 3,875 6,367 Other Accounts Payable Free Cash Flow($000) 2010 6,121 4,442 10,563 6,830 (3,964) (3,093) (3,419) (3,879) 4,291) (4,950) (4,950) (4,950)(4,950)(19,350) 5,5355,907 6,865 6,248) 14,400 (4,442) (4,442) (4,442) 4,442)(4,442) 2007 3,583 4,442 8,025 5,553 2005 2006 3,351 4,442 7,793 5,621 2008 4,341 4,442 8,78310,255 5,493 2009 5,813 4,442 Net Income Plus: After-tax Interest Expense Unlevered Net Income 5.439 Plus: Depreciation Less: Increase in NWC Less: Capital Expenditures 4,500 Free Cash Flow of Firm Plus: Net Borrowing Less: After-tax Interest Expense Continuation Value: Multiples Approach ($000) EBITDA in 2010 EBITDA Multiple Continuation Enterprise Value Debt Continuation Equity Value 23,081 Common Multiples 1.7 X 15.5 x 19.9 x 9.1x EVISales 210,037 PIE (levered 114,900)P/E (unlevered) 95,137 P19-16 (similar to) Question Help Approximately what expected future long-run growth rate would provide the same EBITDA multiple in 2010 as ldeko has in 2005 (i.e 9.1 )? Assume that the future debt-to-value ratio is held constant at 40%; the debt cost of capital is 6.8%; ldeko's market share will increase by 0.40% per year until 2010: investment, financing, and depreciation will be adjusted accordingly (see projected capital expenditures here); and the projected improvements in working capitaldo not occur, so the numbers in the table remain at their 2005 levels through 2010 (that is, Ideko's working capital requirements through 2010 will be as shown hereEEB). The projected free cash flows and continuation values are shown hereand here, respectively. Assume that ldeko's unlevered cost of capital is 12.04%. Assume an income tax rate of 35%. The expected future long-run growth rate would be %. (Round to two decimal places.) (Click on the Icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Ideko Capital Expenditure Assumptions ($ 000) 2005 52,000 4,950 (5,695)(5,621) (5,553)(5,493) 51,255 2007 50,584 4,950 2010 48,949 19,350 2006 51,255 4,950 2008 49,981 4,950 2009 49,438 4,950 (5,439)(6,830) 48,949 Opening Book Value New Investment Depreciation Closing Book Value 50,584 49,981 49,438 61,469 Print Done (Click on the Icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet) Ideko's Working Capital Requirements Working Capital Days Assets >2005 Days 90 45 45 30 2005 Days 90 45 45 30 Based on: Sales Revenue Raw Materials Costs Raw MaterialsLabor Costs Sales Revenue Accounts Receivable Raw Materials Finished Goods Minimum Cash Balance Liabilities 15 45 Direct Labor Admin Costs Wages Payable Other Accounts Payable 45 Raw Materials + Sales and Marketing Working Capital ($ 000) 2006 2007 2010 2005 2008 2009 Assets 17,285 20,133 2,198 4,711 6,711 29,236 33,753 Accounts Receivable Raw Materials Finished Goods Minimum Cash Balance 22,424 24,941 27,705 2,950 6,627 9,235 30,739 3,245 7,409 10,246 51,639 2,034 4,155 5,762 2,678 5,921 8,314 37,612 41,854 46,517 2,428 5,285 7,475 Total Current Assets Labilities 1,512 4,469 Wages Payable 1,237 1,340 1,662 1,825 2,052 5,142 5,763 3,425 3,875 6,367 Other Accounts Payable Free Cash Flow($000) 2010 6,121 4,442 10,563 6,830 (3,964) (3,093) (3,419) (3,879) 4,291) (4,950) (4,950) (4,950)(4,950)(19,350) 5,5355,907 6,865 6,248) 14,400 (4,442) (4,442) (4,442) 4,442)(4,442) 2007 3,583 4,442 8,025 5,553 2005 2006 3,351 4,442 7,793 5,621 2008 4,341 4,442 8,78310,255 5,493 2009 5,813 4,442 Net Income Plus: After-tax Interest Expense Unlevered Net Income 5.439 Plus: Depreciation Less: Increase in NWC Less: Capital Expenditures 4,500 Free Cash Flow of Firm Plus: Net Borrowing Less: After-tax Interest Expense Continuation Value: Multiples Approach ($000) EBITDA in 2010 EBITDA Multiple Continuation Enterprise Value Debt Continuation Equity Value 23,081 Common Multiples 1.7 X 15.5 x 19.9 x 9.1x EVISales 210,037 PIE (levered 114,900)P/E (unlevered) 95,137