VALUATION METHOD

DISCOUNTED CASH FLOW METHOD

1. Company Z has the following data: Sales 2015 is 500M Sales growth rate: 9% in 2016 but will be slow by 1% per year to 4% by 2021. The 4% by 2021 is assumed to be the long run growth in the next years EBIT is 10% of sales Increase in NWC is 9% of any increase in sales Net investment is 8% of any increase in sales Tax rate 40% WACC is 12% a. Compute the Free Cash Flow (FCF) b. Compute the Terminal Value (TV) c. Compute the Enterprise Value (EV)2. Sisyphus Corp. has projected that their performance for the next five years result to the following: YEAR Revenue Cash Operating Expenses 50 30 55.00 33.00 60.50 36.30 66.55 39.93 73.21 43.92 Terminal value was assumed based on the growth rate of the cash flows. Annual Capital investment requirement is at P2 million. Income Tax rate is at 30%. The required rate or return for their business is 14%. Requirement: a. Compute for the growth rate b. How much is the Terminal Value? c. How much is the Free Cash Flow for years 1-5? d. How much is the Discounted Net Cash Flows to the Firm for years 1-5