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United Company is opening its doors to investors and shared the following prospective financial information: 2024 2022 10,000,000 12,000,000 14,000,000 15,000,000 6,000,000 6,000,000 1,200,000 400,000 2,000,000 2,400,000 720,000 2021 2023 Revenues Cost of Goods Sold Gross Profit Selling Expenses Administrative Expenses Depreciation Operating Income Income Tax Expenses Net Profit 5,000,000 5,000,000 1,000,000 400,000 2,000,000 1,600,000 7,000,000 7,000,000 1,400,000 400,000 2,000,000 3,200,000 960,000 2,240,000 7,500,000 7,500,000 1,500,000 400,000 2,000,000 3,600,000 1,080,000 2,520,000 480,000 1,120,000 1,680,000 United Company also estimates that annual capital investment required is P1,000,000. Assuming cost of capital is 10% and United Company assumes that net cash flow is expected to grow by 5%. • Compute for the net cash flow and the discounted net cash flow to the firm. • Assuming United Company has outstanding debt of P10,000,000, what is the reasonable price that should be paid by an investor to buy 20% of United Company?

United Company is opening its doors to investors and shared the following prospective financial information: 2024 2022 10,000,000 12,000,000 14,000,000 15,000,000 6,000,000 6,000,000 1,200,000 400,000 2,000,000 2,400,000 720,000 2021 2023 Revenues Cost of Goods Sold Gross Profit Selling Expenses Administrative Expenses Depreciation Operating Income Income Tax Expenses Net Profit 5,000,000 5,000,000 1,000,000 400,000 2,000,000 1,600,000 7,000,000 7,000,000 1,400,000 400,000 2,000,000 3,200,000 960,000 2,240,000 7,500,000 7,500,000 1,500,000 400,000 2,000,000 3,600,000 1,080,000 2,520,000 480,000 1,120,000 1,680,000 United Company also estimates that annual capital investment required is P1,000,000. Assuming cost of capital is 10% and United Company assumes that net cash flow is expected to grow by 5%. • Compute for the net cash flow and the discounted net cash flow to the firm. • Assuming United Company has outstanding debt of P10,000,000, what is the reasonable price that should be paid by an investor to buy 20% of United Company?

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
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United Company is opening its doors to investors and shared the following prospective financial information: 2021 2022 2023 2024 Revenues Cost of Goods Sold 12,000,000 6,000,000 6,000,000 1,200,000 400,000 2,000,000 2,400,000 720,000 1,680,000 14,000,000 7,000,000 7,000,000 1,400,000 400,000 2,000,000 3,200,000 960,000 2,240,000 15,000,000 7,500,000 10,000,000 5,000,000 5,000,000 1,000,000 400,000 2,000,000 1,600,000 480,000 1,120,000 Gross Profit 7,500,000 1,500,000 400,000 Selling Expenses Administrative Expenses Depreciation Operating Income Income Tax Expenses Net Profit 2,000,000 3,600,000 1,080,000 2,520,000 United Company also estimates that annual capital investment required is P1,000,000. Assuming cost of capital is 10% and United Company assumes that net cash flow is expected to grow by 5%. Compute for the net cash flow and the discounted net cash flow to the firm. Assuming United Company has outstanding debt of P10,000,000, what is the reasonable price that should be paid by an investor to buy 20% of United Company?
Transcribed Image Text:United Company is opening its doors to investors and shared the following prospective financial information: 2021 2022 2023 2024 Revenues Cost of Goods Sold 12,000,000 6,000,000 6,000,000 1,200,000 400,000 2,000,000 2,400,000 720,000 1,680,000 14,000,000 7,000,000 7,000,000 1,400,000 400,000 2,000,000 3,200,000 960,000 2,240,000 15,000,000 7,500,000 10,000,000 5,000,000 5,000,000 1,000,000 400,000 2,000,000 1,600,000 480,000 1,120,000 Gross Profit 7,500,000 1,500,000 400,000 Selling Expenses Administrative Expenses Depreciation Operating Income Income Tax Expenses Net Profit 2,000,000 3,600,000 1,080,000 2,520,000 United Company also estimates that annual capital investment required is P1,000,000. Assuming cost of capital is 10% and United Company assumes that net cash flow is expected to grow by 5%. Compute for the net cash flow and the discounted net cash flow to the firm. Assuming United Company has outstanding debt of P10,000,000, what is the reasonable price that should be paid by an investor to buy 20% of United Company?
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