It is the end of 2017 and you are asked to value the XYZ corp. You have the foll
ID: 2806215 • 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%.
Q2. Compute the average historical COGS/Sales and Operating expenses/Sales
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
1)Average cost of goods sold = Total cost of goods sold for all years /n
where n = number of years
= [1200000+1600080+1920000]/3
= 1573360
Average sales = [1500000+2000100+2400000]/3
= 5900100/3
= 1966700
COGS /Sales = 1573360 / 1966700
= .80 or 80%
2)Average operating expense = [150000+200010+240000]/3
= 196670
operating expense /sales = 196670/1966700
= .10 or 10%
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