Determine the value of one ordinary share of Carter & Briggs using: Discounted free cash flows method. To assist you with the task, the following information is provided: During Year 0, dividends proposed and paid were £120m Number of ordinary shares remains stable = 500m Dividends annual growth rate to perpetuity = 4% Carter & Briggs’s WACC is 10%, while its cost of ordinary share capital is 12% Sales revenue for Year 0 = £1,200m Carter & Briggs will experience abnormal growth of sales revenue for the next five years = 16% p.a., which is followed by stable perpetual growth at 12% p.a. Operating profit margin will remain constant at 18% of sales revenue Corporation tax is stable = 30% Annual additional working capital investment over the next six years will be 7% of annual sales growth Annual additional non-current asset investment over the next six years will be 10% of annual sales growth Long-term debt is currently = £843m Sustainable growth rate from Year 6 is 2%
Determine the value of one ordinary share of Carter & Briggs using: Discounted free cash flows method. To assist you with the task, the following information is provided: During Year 0, dividends proposed and paid were £120m Number of ordinary shares remains stable = 500m Dividends annual growth rate to perpetuity = 4% Carter & Briggs’s WACC is 10%, while its cost of ordinary share capital is 12% Sales revenue for Year 0 = £1,200m Carter & Briggs will experience abnormal growth of sales revenue for the next five years = 16% p.a., which is followed by stable perpetual growth at 12% p.a. Operating profit margin will remain constant at 18% of sales revenue Corporation tax is stable = 30% Annual additional working capital investment over the next six years will be 7% of annual sales growth Annual additional non-current asset investment over the next six years will be 10% of annual sales growth Long-term debt is currently = £843m Sustainable growth rate from Year 6 is 2%
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter12: Valuation: Cash-flow Based Approaches
Section: Chapter Questions
Problem 1DIC
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Determine the value of one ordinary share of Carter & Briggs using:
- Discounted
free cash flows method.
To assist you with the task, the following information is provided:
- During Year 0, dividends proposed and paid were £120m
- Number of ordinary shares remains stable = 500m
- Dividends annual growth rate to perpetuity = 4%
- Carter & Briggs’s WACC is 10%, while its cost of ordinary share capital is 12%
- Sales revenue for Year 0 = £1,200m
- Carter & Briggs will experience abnormal growth of sales revenue for the next five years = 16% p.a., which is followed by stable perpetual growth at 12% p.a.
- Operating profit margin will remain constant at 18% of sales revenue
- Corporation tax is stable = 30%
- Annual additional working capital investment over the next six years will be 7% of annual sales growth
- Annual additional non-current asset investment over the next six years will be 10% of annual sales growth
- Long-term debt is currently = £843m
- Sustainable growth rate from Year 6 is 2%
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