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Company Z has the following data: Sales 2015 is 500 million 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 An 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% Requirement: Compute the Free Cash Flow (FCF) Compute the Terminal Value (TV) Compute the Enterprise Value (EV)

Company Z has the following data: Sales 2015 is 500 million 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 An 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% Requirement: Compute the Free Cash Flow (FCF) Compute the Terminal Value (TV) Compute the Enterprise Value (EV)

Essentials Of Investments
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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  1. Company Z has the following data:
  • Sales 2015 is 500 million
  • 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
  • An 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%

Requirement:

  1. Compute the Free Cash Flow (FCF)
  2. Compute the Terminal Value (TV)
  3. Compute the Enterprise Value (EV)
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