2. Sisyphus Corp. has projected that their performance for the next five years result to the following: YEAR Revenue Cash Operating Expenses 30 33.00 1 50 2 55.00 3 60.50 36.30 4 39.93 66.55 73.21 5 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?
2. Sisyphus Corp. has projected that their performance for the next five years result to the following: YEAR Revenue Cash Operating Expenses 30 33.00 1 50 2 55.00 3 60.50 36.30 4 39.93 66.55 73.21 5 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
DISCOUNTED CASH FLOW METHOD
Transcribed Image Text:2. Sisyphus Corp. has projected that their performance for the next five years result to the
following:
YEAR
Revenue
Cash Operating Expenses
1
50
30
33.00
55.00
3
60.50
36.30
4.
66.55
39.93
5
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?
Transcribed Image Text: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)
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