Banoffee Ltd operates a chain of Cafes around the country. You have been provided with the following projections for the company (in millions of Rupees) EBIT Net Cap Ex Total Working Capital Cost of Equity Pre-tax Cost of Debt Debt Equity Ratio 1 110.00 30 60 12% 8% 20% 2 €125.00 37.5 The company has a tax te of 20%, The firm will grow at 5% forever, starting in year 4. The working capital currently is 48 million. a. Estimate the expected cash flows to the firm for years 1-4. b. Estimate the cost of capital each year for years 1-4. c. Estimate the terminal (Horizon) value. 70 11% 7.50% 20% 3 156.25 46.5 82 11% 7% 20% 4 (Terminal {Horizon} year) ₹ 172 32 90 10% 7% 20%
Banoffee Ltd operates a chain of Cafes around the country. You have been provided with the following projections for the company (in millions of Rupees) EBIT Net Cap Ex Total Working Capital Cost of Equity Pre-tax Cost of Debt Debt Equity Ratio 1 110.00 30 60 12% 8% 20% 2 €125.00 37.5 The company has a tax te of 20%, The firm will grow at 5% forever, starting in year 4. The working capital currently is 48 million. a. Estimate the expected cash flows to the firm for years 1-4. b. Estimate the cost of capital each year for years 1-4. c. Estimate the terminal (Horizon) value. 70 11% 7.50% 20% 3 156.25 46.5 82 11% 7% 20% 4 (Terminal {Horizon} year) ₹ 172 32 90 10% 7% 20%
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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Transcribed Image Text:Banoffee Ltd operates a chain of Cafes around the country. You have been provided
with the following projections for the company (in millions of Rupees)
EBIT
Net Cap Ex
Total Working
Capital
Cost of Equity
Pre-tax Cost of Debt
1
110.00
30
60
12%
8%
2
€ 125.00
37.5
Debt Equity Ratio
The company has a tax rate of 20%,
The firm will grow at 5% forever, starting in year 4. The
working capital currently is 48 million.
a. Estimate the expected cash flows to the firm for years 1-4.
b. Estimate the cost of capital each year for years 1-4.
c. Estimate the terminal (Horizon) value.
20%
70
11%
7.50%
20%
3
156.25
46.5
82
11%
7%
20%
4 (Terminal
{Horizon} year)
₹
172
32
90
10%
7%
20%
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