0 F4 EP Insert Endnote Next Footnote Show Notes La Manage Sources Style: APA Bibliography Insert Index Update Index Insert Table of Authorities Update Table Smart Researcher Lookup Research Insert Citation Insert Caption Insert Table of Figures | Update Table Cross-reference Captions Mark Entry Mark Citation otnotes Citations & Bibliography Index Table of Authorities Section 3: Valuation of the Firm Fastfix is being considered by a rival as a takeover target. Fast fix are aware of the interest of the rival firm, so they want to assess what would be a fair value of the firm as a basis for negotiations to sell You are to calculate this fair value based on the 2012 position and use the following information on growth. For the next five years, sales will grow by 10 percent and after that the long-term growth is estimated to be 5 percent in perpetuity. The free cashflow for 2012 is $28500 and the cost of debt is 6% Required: i. Calculate the cost of equity using 2012 share price and dividend/share and 10% growth rate (use Gordon Growth model) ii. Calculate the capital structure using market value weights for equity and book value for debt ii. Calculate the WACC iv. Calculate the value of the firm today by projecting growth at 10% for the next five years and after that a growth of 5% in perpetuity Note Endlichew Zealand Focus search Footnote w ! Update Index Update Smart Researcher Lookup Research LV y Style: APA Insert Citation Bibliography Citations & Bibliography Notes D Mark Entry DI Update Table Insert Caption Cross-reference Captions Mark Citation index Table of A 1. The free cash flow is calculated from the net income for 2012 and adjusting for changes in current assets, current liabilities, fixed assets and then adding back depreciation. This calculation is outside the scope of this paper. Financial Ratio Formulae (for this analysis) Working Capital Current Assets - Current liabilities Current Ratio Current Assets/Current liabilities Inventory turnover (times) Cost of goods sold/End of year inventory Receivable turnover Annual Sales/Accounts Receivable Accounts (times) Average collection period (ACP) (365 x Accounts Receivable) Sales (days) Payables Deferral period (PDP) (Payables x 365YCOGS (days) ich F EP DI Insert Index ! Update Index Smart Researcher Lookup Research La Manage Sources Style: APA Insert Citation Bibliography Citations a Bibliography Insert Caption Insert Table of Figures Update Table Cross-reference Captions Mark Entry Mark Citation Financial Ratio Formulae (for this analysis) Working Capital Current Assets - Current liabilities Current Ratio Current Assets/Current liabilities Inventory tumover (times) Cost of goods sold/End of year inventory Receivable tumover Annual Sales/Accounts Receivable Accounts (times) Average collection period (ACP) (365 x Accounts Receivabley Sales (days) Payables Deferral period (PDP) (Payables x 365)COGS (days) Inventory Conversion Penod (ICP) (Inventory x 365)COGS (days) Cash Conversion Cycle (CCC) ACP + ICP - PDP (days) Debt to Total Assets All Debu Total Assets Times interest eamed EBIT/Interest charges Formulas Data Review View File Help Foxit PDF e se Home Insert Page Layout Cut Calibri In Copy Format Painter BIUD 12 Genera AA EE T 2 Wrap Text Merge & Center Paste A E Alignment Clipboard Font C D E F G H 2 Q2 Fastfix Auto - Base Data File Fastfix Autoparts Ltd Income Statement: for the period ending 31 December 2011 2012 Sales 6,034,400 7,035,600 COGS 4,980,000 5,800,000 Other expenses 720,000 612,960 Depreciation 116,960 120,000 Total operation costs 5,816,960 6,532,960 EBIT 217,440 502,640 Interest expense 176,000 80,000 EBT 41,440 422,640 Taxes (40%) 16,576 169,056 Net Income 24,864 253,584 Fastfix Autoparts Ltd Balance Sheet: As at 31 December + 2011 2012 Cash 7,282 e 14,000 Short-term investments 20,000 71,632 Account Rerecivable 632,160 S878.000 Inventories 1.287.360 1,716,480 Total Current Assets 1,946,802 2.680,112 Net Fixed Assets 939,790 836,840 Total Assets 2,886,592 3,516,952 Sheet1 Sheet2 Sheet Type here to search 0 F4 EP Insert Endnote Next Footnote Show Notes La Manage Sources Style: APA Bibliography Insert Index Update Index Insert Table of Authorities Update Table Smart Researcher Lookup Research Insert Citation Insert Caption Insert Table of Figures | Update Table Cross-reference Captions Mark Entry Mark Citation otnotes Citations & Bibliography Index Table of Authorities Section 3: Valuation of the Firm Fastfix is being considered by a rival as a takeover target. Fast fix are aware of the interest of the rival firm, so they want to assess what would be a fair value of the firm as a basis for negotiations to sell You are to calculate this fair value based on the 2012 position and use the following information on growth. For the next five years, sales will grow by 10 percent and after that the long-term growth is estimated to be 5 percent in perpetuity. The free cashflow for 2012 is $28500 and the cost of debt is 6% Required: i. Calculate the cost of equity using 2012 share price and dividend/share and 10% growth rate (use Gordon Growth model) ii. Calculate the capital structure using market value weights for equity and book value for debt ii. Calculate the WACC iv. Calculate the value of the firm today by projecting growth at 10% for the next five years and after that a growth of 5% in perpetuity Note Endlichew Zealand Focus search Footnote w ! Update Index Update Smart Researcher Lookup Research LV y Style: APA Insert Citation Bibliography Citations & Bibliography Notes D Mark Entry DI Update Table Insert Caption Cross-reference Captions Mark Citation index Table of A 1. The free cash flow is calculated from the net income for 2012 and adjusting for changes in current assets, current liabilities, fixed assets and then adding back depreciation. This calculation is outside the scope of this paper. Financial Ratio Formulae (for this analysis) Working Capital Current Assets - Current liabilities Current Ratio Current Assets/Current liabilities Inventory turnover (times) Cost of goods sold/End of year inventory Receivable turnover Annual Sales/Accounts Receivable Accounts (times) Average collection period (ACP) (365 x Accounts Receivable) Sales (days) Payables Deferral period (PDP) (Payables x 365YCOGS (days) ich F EP DI Insert Index ! Update Index Smart Researcher Lookup Research La Manage Sources Style: APA Insert Citation Bibliography Citations a Bibliography Insert Caption Insert Table of Figures Update Table Cross-reference Captions Mark Entry Mark Citation Financial Ratio Formulae (for this analysis) Working Capital Current Assets - Current liabilities Current Ratio Current Assets/Current liabilities Inventory tumover (times) Cost of goods sold/End of year inventory Receivable tumover Annual Sales/Accounts Receivable Accounts (times) Average collection period (ACP) (365 x Accounts Receivabley Sales (days) Payables Deferral period (PDP) (Payables x 365)COGS (days) Inventory Conversion Penod (ICP) (Inventory x 365)COGS (days) Cash Conversion Cycle (CCC) ACP + ICP - PDP (days) Debt to Total Assets All Debu Total Assets Times interest eamed EBIT/Interest charges Formulas Data Review View File Help Foxit PDF e se Home Insert Page Layout Cut Calibri In Copy Format Painter BIUD 12 Genera AA EE T 2 Wrap Text Merge & Center Paste A E Alignment Clipboard Font C D E F G H 2 Q2 Fastfix Auto - Base Data File Fastfix Autoparts Ltd Income Statement: for the period ending 31 December 2011 2012 Sales 6,034,400 7,035,600 COGS 4,980,000 5,800,000 Other expenses 720,000 612,960 Depreciation 116,960 120,000 Total operation costs 5,816,960 6,532,960 EBIT 217,440 502,640 Interest expense 176,000 80,000 EBT 41,440 422,640 Taxes (40%) 16,576 169,056 Net Income 24,864 253,584 Fastfix Autoparts Ltd Balance Sheet: As at 31 December + 2011 2012 Cash 7,282 e 14,000 Short-term investments 20,000 71,632 Account Rerecivable 632,160 S878.000 Inventories 1.287.360 1,716,480 Total Current Assets 1,946,802 2.680,112 Net Fixed Assets 939,790 836,840 Total Assets 2,886,592 3,516,952 Sheet1 Sheet2 Sheet Type here to search