Answer the following questions for Miya Corporation.

Assume that firm revenues grow at a rate of 10% per year during years 1 through 4 before leveling out at no growth for year 5 and beyond. You may also assume that Miyas gross profit margin is 65%; operating expenses (before depreciation) to sales is 35%; current assets to sales is 15%; accounts payable to sales is 5%; and net property, plant, and equipment (PPE) to sales is 40%; Net working capital to sales ratio is 10%, and that Miya maintains equal dollar amounts of long-term debt and equity to finance its growing needs for invested capital. The projected financial statements of Miya Corporation are as follows:

Also assume that the cost of unlevered equity in this case is 13%. The cost of debt remains at 8%. The corporate tax rate is 30%. Please assume that the WACC for the terminal value is 13%.

Calculate the enterprise value using the APV method (Enterprise Value = Value of the Unlevered Free Cash Flows for the Planning Period + Value of the Planning Period Interest Tax Saving + Present Value of the Estimated Terminal Value).

Hints: CAPEX for year t = Net PP&E for year t Net PP&E for year t-1 + Depreciation expense for year t Changes in NWC for year t = NWC for year t NWC for year t-1. Net working capital to sales ratio = 10%

Actual 1 110,000.00 Projected Sales Revenues 3 121,000.00 133,100.00 Sales 100,000.00 146,410.00 Current Assets Net Property, Plant & Equipment Total Accruals & Payables Long-term debt Equity Total 15,000.00 40,000.00 55,000.00 5,000.00 25,000.00 25,000.00 55,000.00 1 1.00 16,500.00 44,000.00 60,500.00 5,500.00 27,500.00 27,500.00 60,500.00 Proforma Balance Sheets ($000) 2 2.00 3.00 18,150.00 19,965.00 48,400.00 53,240.00 66,550.00 73,205.00 6,050.00 6,655.00 30,250.00 33,275.00 30,250.00 33,275.00 66,550.00 73,205.00 4.00 21,961.50 58,564.00 80,525.50 7,320.50 36,602.50 36,602.50 80,525.50 1 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Operating income (Earnings Before Interest and Taxes) Less: Interest expense Earnings before taxes Less: Taxes Net income 110,000.00 (38,500.00) 71,500.00 (38,500.00) (8,000.00) 25,000.00 (2,000.00) 23,000.00 (6,900.00) 16,100.00 Pro Forma Income Statements ($000) 2. 3 121,000.00 133,100.00 (42,350.00) (46,585.00) 78,650.00 86,515.00 (42,350.00) (46,585.00) (8,400.00) (8,840.00) 27,900.00 31,090.00 (2,200.00) (2,420.00) 25,700.00 28,670.00 (7,710.00) (8,601.00) 17,990.00 20,069.00 4 146,410.00 (51,243.50) 95,166.50 (51,243.50) (9,324.00) 34,599.00 (2,662.00) 31,937.00 (9,581.10) 22,355.90 Operating income (Earings Before Interest and Taxes) Less: Cash tax payments Net operating profits after taxes (NOPAT) 25,000.00 (7,500.00) 17,500.00 27,900.00 (8,370.00) 19,530.00 31,090.00 (9,327.00) 21,763.00 34,599.00 (10,379.70) 24,219.30 Actual 1 110,000.00 Projected Sales Revenues 3 121,000.00 133,100.00 Sales 100,000.00 146,410.00 Current Assets Net Property, Plant & Equipment Total Accruals & Payables Long-term debt Equity Total 15,000.00 40,000.00 55,000.00 5,000.00 25,000.00 25,000.00 55,000.00 1 1.00 16,500.00 44,000.00 60,500.00 5,500.00 27,500.00 27,500.00 60,500.00 Proforma Balance Sheets ($000) 2 2.00 3.00 18,150.00 19,965.00 48,400.00 53,240.00 66,550.00 73,205.00 6,050.00 6,655.00 30,250.00 33,275.00 30,250.00 33,275.00 66,550.00 73,205.00 4.00 21,961.50 58,564.00 80,525.50 7,320.50 36,602.50 36,602.50 80,525.50 1 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense Operating income (Earnings Before Interest and Taxes) Less: Interest expense Earnings before taxes Less: Taxes Net income 110,000.00 (38,500.00) 71,500.00 (38,500.00) (8,000.00) 25,000.00 (2,000.00) 23,000.00 (6,900.00) 16,100.00 Pro Forma Income Statements ($000) 2. 3 121,000.00 133,100.00 (42,350.00) (46,585.00) 78,650.00 86,515.00 (42,350.00) (46,585.00) (8,400.00) (8,840.00) 27,900.00 31,090.00 (2,200.00) (2,420.00) 25,700.00 28,670.00 (7,710.00) (8,601.00) 17,990.00 20,069.00 4 146,410.00 (51,243.50) 95,166.50 (51,243.50) (9,324.00) 34,599.00 (2,662.00) 31,937.00 (9,581.10) 22,355.90 Operating income (Earings Before Interest and Taxes) Less: Cash tax payments Net operating profits after taxes (NOPAT) 25,000.00 (7,500.00) 17,500.00 27,900.00 (8,370.00) 19,530.00 31,090.00 (9,327.00) 21,763.00 34,599.00 (10,379.70) 24,219.30