Question 3 (Total 24 points) a) You are provided with the following table for assumptions of Beta Inc.'s financial forecast and valuation Assumptions for financial forecast and valuation of Beta Ine. 2013 2014 2015 2016 and after Revenue (annual growth rate) 8.0% 6.0% 4.0% 4.0% COGS (% of revenue) 35.0% 35.5% 36.0% 36.0% Other op expense (including depre, exp) (% of 32.0% 33.0% 34.0% 34.0% revenue) Tax rate on operating income 20.5% 21.0% 21.0% 21.0% Net working capital (% of revenue) 16.5% 17.0% 17.0% 17.0% Net fixed assets % of revenue) 90.096 91.09 91.0% 91.0% Book D (DE) 28.0% 30.0% 30.0% 30.0% (18 points) Given the forecast assumptions above, complete the valuation workspace below to forecast Beta Inc.'s FCFF in 2013-16. (Note: Use information on the balance sheets in question I to calculate relevant figures for 2012.) 2012 Forecast FCFF 2014F 2013F 2015F 2016F Operating revenue Operating expense Operating income (before tax) Tax on operating income NOPLAT Change in net working capital 1.) Capital expenditure, net of depr. expense Free cash flow to firm (FCFF) Net working capital (+) Operating current assets (-) Operating current liabilities Net fixed assets Net operating assets RNOA Net financial obligations (D) Book common shareholders' equity (E) WACC of 12%, calculate the equity value of Beta Inc. by completing the workspace below. (6 points) Suppose you are at the beginning of 2013. Giyen your FCFF forecast above and a 2016F F5 2015F 2013F 2014F Free cash flow to firm (FCFF) % 12% WACC 5 PV of FCFF (2013-2016) PV of terminal value Operating value (-Net financial obligations in 2012 Shareholders' value Question 3 (Total 24 points) a) You are provided with the following table for assumptions of Beta Inc.'s financial forecast and valuation Assumptions for financial forecast and valuation of Beta Ine. 2013 2014 2015 2016 and after Revenue (annual growth rate) 8.0% 6.0% 4.0% 4.0% COGS (% of revenue) 35.0% 35.5% 36.0% 36.0% Other op expense (including depre, exp) (% of 32.0% 33.0% 34.0% 34.0% revenue) Tax rate on operating income 20.5% 21.0% 21.0% 21.0% Net working capital (% of revenue) 16.5% 17.0% 17.0% 17.0% Net fixed assets % of revenue) 90.096 91.09 91.0% 91.0% Book D (DE) 28.0% 30.0% 30.0% 30.0% (18 points) Given the forecast assumptions above, complete the valuation workspace below to forecast Beta Inc.'s FCFF in 2013-16. (Note: Use information on the balance sheets in question I to calculate relevant figures for 2012.) 2012 Forecast FCFF 2014F 2013F 2015F 2016F Operating revenue Operating expense Operating income (before tax) Tax on operating income NOPLAT Change in net working capital 1.) Capital expenditure, net of depr. expense Free cash flow to firm (FCFF) Net working capital (+) Operating current assets (-) Operating current liabilities Net fixed assets Net operating assets RNOA Net financial obligations (D) Book common shareholders' equity (E) WACC of 12%, calculate the equity value of Beta Inc. by completing the workspace below. (6 points) Suppose you are at the beginning of 2013. Giyen your FCFF forecast above and a 2016F F5 2015F 2013F 2014F Free cash flow to firm (FCFF) % 12% WACC 5 PV of FCFF (2013-2016) PV of terminal value Operating value (-Net financial obligations in 2012 Shareholders' value