4. Use the most appropriate valuation model to calculate the expected share price of ABC Corporation using all the variables provided. (round your final answer to two decima points) (15 marks) likely to be a successful event. Otherwise you would have harder time to raise money. Part 2 The IPO turned out to be a great success. ABC Corporation raised $ 10 million in the process. Mr. Entrepreneur was very excited about the fund raising and looked forward to investing the raised funds in some future projects that would help the company move to the next level. Mr. Entrepreneur called in his vice president in Finance, Mr. Financer, asked him to prepared some investing alternatives fo the company leadership to decide. Mr. Financer came back with three investment proposals: The first proposal is to add 5 trucks to company's delivery flee The cashflow of the addition of trucks is projected as follows: Investment proposal #1 - adding 5 trucks expenditure Year Tear 2 Year 3 Year! Net cost of trucks $ 300,000 Additional Revenue $ 44.000 76.0005 112.000 225.000 $168.000 Additional cost (11,000) (11.000) (11.000) (11,000) (11.000) Amortization (45.000) (66,000 (63,000) (63,000) (63,000) Net increase in income 112.000) (1,000) 38,000 151.000 94.000 Less Tax at 33% (12.540) (-19,830) (31.020) Increase in after-tax income 112.000 (1,000) 25.100 101.178 63.980 Add back amortization 45,000 56.000 63,000 63,000 63.000 Net change in cash flow 300,00) $33.000 565,000 $88.460 5161.170 S125.980 The second proposal is to purchase a more advanced wood crafting machine. The projected revenues and costs and chang in net cash flow are summarized in the table below: Year 5 Investment proposal #2 - adding a wood crafting machine: Initial expenditure Year 1 Year 2 Year 3 Year 4 Year 5 Netcost of trucks S 700,000 Additional Revenue 587.000 $ 175.000 262.000 393,000 $325,000 Additional cost (26.000 26.000) (26.000) (26.000) (26,000 Amortization (17.000) (17,000) (17.000) (17.000) (17,000 Net increase in income 44,000 132,000 219,000 350,000 282.000 Less Tax at 33% (14.520) (43.560) (72.270) (115.500) (93,060 Increase in after tax income 29.480 $8.440 146,739 234.500 188,940 Add back amortization 17.000 17.000 17.000 17.000 17.000 Net change in cash flow $700,000) S46.489 S105,440 S163,739 5251,500 5205,940 The third proposal istoadda new noduction line making new TI 4. Use the most appropriate valuation model to calculate the expected share price of ABC Corporation using all the variables provided. (round your final answer to two decima points) (15 marks) likely to be a successful event. Otherwise you would have harder time to raise money. Part 2 The IPO turned out to be a great success. ABC Corporation raised $ 10 million in the process. Mr. Entrepreneur was very excited about the fund raising and looked forward to investing the raised funds in some future projects that would help the company move to the next level. Mr. Entrepreneur called in his vice president in Finance, Mr. Financer, asked him to prepared some investing alternatives fo the company leadership to decide. Mr. Financer came back with three investment proposals: The first proposal is to add 5 trucks to company's delivery flee The cashflow of the addition of trucks is projected as follows: Investment proposal #1 - adding 5 trucks expenditure Year Tear 2 Year 3 Year! Net cost of trucks $ 300,000 Additional Revenue $ 44.000 76.0005 112.000 225.000 $168.000 Additional cost (11,000) (11.000) (11.000) (11,000) (11.000) Amortization (45.000) (66,000 (63,000) (63,000) (63,000) Net increase in income 112.000) (1,000) 38,000 151.000 94.000 Less Tax at 33% (12.540) (-19,830) (31.020) Increase in after-tax income 112.000 (1,000) 25.100 101.178 63.980 Add back amortization 45,000 56.000 63,000 63,000 63.000 Net change in cash flow 300,00) $33.000 565,000 $88.460 5161.170 S125.980 The second proposal is to purchase a more advanced wood crafting machine. The projected revenues and costs and chang in net cash flow are summarized in the table below: Year 5 Investment proposal #2 - adding a wood crafting machine: Initial expenditure Year 1 Year 2 Year 3 Year 4 Year 5 Netcost of trucks S 700,000 Additional Revenue 587.000 $ 175.000 262.000 393,000 $325,000 Additional cost (26.000 26.000) (26.000) (26.000) (26,000 Amortization (17.000) (17,000) (17.000) (17.000) (17,000 Net increase in income 44,000 132,000 219,000 350,000 282.000 Less Tax at 33% (14.520) (43.560) (72.270) (115.500) (93,060 Increase in after tax income 29.480 $8.440 146,739 234.500 188,940 Add back amortization 17.000 17.000 17.000 17.000 17.000 Net change in cash flow $700,000) S46.489 S105,440 S163,739 5251,500 5205,940 The third proposal istoadda new noduction line making new TI