1. Note the enterprise and equity valuations for Life Technology in the Excel spreadsheet model titled Life Tech Undertakes Strategic Review Financial Model on the companion website accompanying this book. View this as the base case. The CEO Greg Lucier asks his CFO to determine the impact of plausible assumption changes on the firm’s valuation. The CFO asks you as a financial analyst to estimate the impact of a change in the firm’s revenue growth rate and cost of sales as a percent of sales. On the Target Assumptions Worksheet, make the following changes and note their impact on Life Tech’s enterprise and equity values on the Valuation Worksheet: (Appendix)

a. Increase the sales growth rate in 2014 by 2 percentage points.

b. Retaining the assumption change made in (a), decrease the cost of sales as a percent of sales by 2 percentage points in 2014.

What is Life Tech’s enterprise and equity value resulting from these changes? How do they compare with the base case? Briefly explain why each of these changes affects firm value. Do not undo the results of your changes to the model’s base case.