It is the end of 2017 and you are asked to value the XYZ corp. You have the foll
ID: 2806204 • Letter: I
Question
It is the end of 2017 and you are asked to value the XYZ corp. You have the following financials for this firm.
2017
2018
2019
2020
Income Statement
Sales
1,500,000
2,000,100
2,400,000
COGS
1,200,000
1,600,080
1,920,000
Other Expenses (includes dep)
150,000
200,010
240,000
EBIT
150,000
200,010
240,000
Interest Expense
100,000
100,000
100,000
EBT
50,000
100,010
140,000
Tax
17,500
35,004
49,000
Net Income
32,500
65,007
91,000
Selected items of the balance sheet
NetPPE
80,000
100,000
133,340
160,000
AR
100,000
123,288
164,392
197,260
AP
120,000
147,945
197,270
236,712
The tax rate is 35%. You expect sales to grow at 4% from 2020 on. In addition, the cost of capital for this firm is 12%.
Q1. Compute the FCF for 2018, 2019, and 2020 and the average historical COGS/Salesusing the information given..??
2017
2018
2019
2020
Income Statement
Sales
1,500,000
2,000,100
2,400,000
COGS
1,200,000
1,600,080
1,920,000
Other Expenses (includes dep)
150,000
200,010
240,000
EBIT
150,000
200,010
240,000
Interest Expense
100,000
100,000
100,000
EBT
50,000
100,010
140,000
Tax
17,500
35,004
49,000
Net Income
32,500
65,007
91,000
Selected items of the balance sheet
NetPPE
80,000
100,000
133,340
160,000
AR
100,000
123,288
164,392
197,260
AP
120,000
147,945
197,270
236,712
Explanation / Answer
CALCULATION OF FCF 2018 2019 2020 EBIT 150000 200010 240000 Tax at 35% 52500 70004 84000 NOPAT 97500 130006.5 156000 Capital expenditure 20000 33340 26660 NWC -20000 -24657 -32878 -39452 Change in NWC -4657 -8221 -6574 FCFF (NOPAT - Cap Exp - Change in NWC) 82157 104888 135914 PVIF at 12% 0.89286 0.79719 PV at 12% 73354 83616 Sum of PVs of FCFF year 1 to 2 156970 Terminal value of FCFF = 135914/(0.12-0.04) 1698925 PV of terminal value = 1698925*0.79719 1354373 Value of XYZ Corp $ 1,511,343
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