5.You are the CFO of Buyme Limited. Your company is considering an acquisition of

Sellme Limited. As part of the analysis, you have collected the following information about Sellme:

Current 2021 2022 2023

($ millions)

Income Statement:

Sales 1,200.00 1,244.64 1,290.24 1,338.24

Cost of goods sold 756.00 783.84 813.12 842.88

Selling and admin. 120.00 124.32 129.12 133.92

Depreciation 180.00 186.72 193.44 200.64

EBIT 144.00 149.76 154.56 160.80

Interest - - - -

Taxes 48.96 50.88 52.80 54.72

Net income 95.04 98.88 101.76 106.08

Balance sheet data:

Net working capital 57.60 60.00 61.92 64.32

Shareholders' equity 897.60 931.20 965.28 1,001.28

Cash flow data:

Capital expenditure - 217.92 225.60 234.24

(a)What are the projected free cash flows of Sellme Limited for each of the 4 years?

(b)What is the estimated terminal value of Sellme Limited at the end of 2023

assuming a constant growth rate in free cash flows of 2% beyond 2023? Assume

a cost of equity of 11%.

(c) Based on the projected cash flows, what is the value of Sellme? Again, assume a cost of equity of 11%. For this part, ignore the estimated terminal value calculated in (b) and use the shareholders' equity at the of 2023 as the terminal value.

(d)What fraction of Sellme's current value comes from growth opportunities and

what fraction comes from existing assets?