Raymond Spencer founded FlavourStop at the beginning of 2019, which serves a variety of dairy free frozen yogurt. Below are the financial statements for FlavourStop from 2019 ? 2023.

Because FlavourStop is in its start-up life cycle stage, Raymond and the venture investors believe that 40% is an appropriate discount rate until the firm reaches its long-term growth rate of 7% in 2023. At that time, it will have survived and will become a more typical firm with an estimated WACC of 16.52%, target debt-to-value of 0.3, cost of debt of 12% and tax rate of 30%.

Questions:

1. Determine the equity valuation cash flow for each year from 2020 ? 2023.?

2. Determine the terminal value of the venture in year 2022.

3. Determine FlavourStop?s equity value at the end of 2019. What is its value per share?

4. What percentage of ownership should FlavourStop give up to an outside investor who wants to invest $10,000 in the venture at the end of 2019??

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FlavourStop has 10,000 shares outstanding. Income Statements 2019 2020 2021 2022 2023 Sales 200,000 280,000 260,000 240,000 214,000 Cost of goods sold (110,000) (154,000) (143,000) (132,000) (117,700) Gross profit 90,000 126,000 117,000 108,000 96,300 Operating expenses (70,000) (98,000) (91,000) (84,000) (74,900) ЕBITDA 20,000 28,000 26,000 24,000 21,400 Depreciation (4,000) (4,800) (5,760) (6,912) (7,396) ЕBIT 16,000 23,200 20,240 17,088 14,004 Interest (1,500) (3,300) (3,825) (4,260) (3,900) ЕВT 14,500 19,900 16,415 12,828 10,104 Тахes (30%) (4,350) (5,970) (4,925) (3,848) (3,031) Net income 18,850 25,870 21,340 16,676 13,135 FlavourStop has 10,000 shares outstanding. Income Statements 2019 2020 2021 2022 2023 Sales 200,000 280,000 260,000 240,000 214,000 Cost of goods sold (110,000) (154,000) (143,000) (132,000) (117,700) Gross profit 90,000 126,000 117,000 108,000 96,300 Operating expenses (70,000) (98,000) (91,000) (84,000) (74,900) ЕBITDA 20,000 28,000 26,000 24,000 21,400 Depreciation (4,000) (4,800) (5,760) (6,912) (7,396) ЕBIT 16,000 23,200 20,240 17,088 14,004 Interest (1,500) (3,300) (3,825) (4,260) (3,900) ЕВT 14,500 19,900 16,415 12,828 10,104 Тахes (30%) (4,350) (5,970) (4,925) (3,848) (3,031) Net income 18,850 25,870 21,340 16,676 13,135

Answer rating: 100% (QA)

Value per share in 2019 1383 Stepbystep explanation a 2019 2020 2021 2022 ... View the full answer