ASSUMPTIONS AND CASH FLOW STRUCTURE Fixed Costs - Capital expenditure is assumed to be 11.5 million in 1984 and rises by 15% per year. Depreciation for 1984 is assumed to be 10 million (approximately 10% of fixed assets at beginning of 1984) and continues at 10% of the running balance of fixed assets plus capital expenditures each year. R&D is 18.0 million in 1984 and rises at the growth rate of total sales (in ). Distribution and administrative expenses (both assumed to be fixed costs) rise at the inflation rate from their 1983 figures of 13.3 and 22.0 million respectively. Variable Costs - All of the costs of sales in the income statement, net of depreciation, is (arbitrarily) assumed to be variable costs. Variable costs/unit rise at the inflation rate. Note that the 1983 volume used to determine unit costs should be production volume of 28.041, not sales volume. Net Working Capital - NWC in 1983 is unrealistically low for a stand-alone company. Assume that the balance in the NWC account is topped up to 30 million in 1984 and then grows at the growth rate of total revenues thereafter (the net addition each year from cash flow is the current balance times the % change in total sales). Other assumptions - Assume a tax rate of 35%. We used a growth rate of 12% over unit sales in 1983 in estimating the 1984 sales figures. The appropriate sterling discount rate is 18%, based upon average levels of inflation over the past few years. Finally, you may treat sales to the rest of the world as denominated in so as to eliminate the need to directly model other non-$ currencies. Pound inflation is forecast to continue at around 5% into the foreseeable future. U.S. inflation is anticipated to average 3% per annum into the future. Indicate explicitly what your assumptions are about Jaguar unit sales growth for the future.
Consider the exposure (delta) of Jaguar to the $/ rate for a U.S. investor rather than a U.K.investor (10).
Is the exposure to the dollar-based owners the same as that of the pound-based investors above? Why or why not? (10)
o. AutoSave OFF COD ... Group 8 Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments v 10 VAA Wraa Text Number SEX TV (A) X [G 8 WS Peste Merge & Center Insert Y $ % ) Format Delete y Conditional Format Cell Formatting as Table Styles Sort Filter Find Select Analyze Data B 1 I U CA fx =047*(D45+D46) = D48 X c D 7 G IT - J K T. H a P R S T 11 V X Y 2 AX AD Prajected 2 3 1 1 Dolanting 1953 1.445 1994 1.350 1985 1986 1987 1988 1.924 1.298 1 274 1.250 1989 1 291 12.0% 17081 18142 21439 ANNO 28893 30121 3.0% 25691 433005 324462 26400 27192 * 28843 29713 12.0% 14782 16567 18555 AND 23275 28068 A 5.0% 17284 255862 18148.2 19065 A 21009 22059 13521 30000 18.0% 31083 583154 United States 2 Growth, unts 3 Volume unils 15260 9 10 Inflation (% 1. 5 Uss price unit 24884 12 8 sales, dollars 13 7 SAAS, Martin 14 15 Rest of the world 16 U Growth, unts (% 17 9 Vol units 13207 18 19 10 Innation (%) 20 11 pr count, storing 21 12 alus, being 22 23 13 war, cost of sunk 24 14 NMVC 23 15 dicuntrale 26 27 Tulal sales, units 28 16 Total revenues 29 30 17 VAT coas 3. 10 Depreciation 13 19 RKD 33 20 Darbution 13300 14 21 Administration 22000 35 36 22 Total Coals 32 38 23 EBIT 30 24 Tax 40 25 EBIAT 25 Depreciation 42 27 Operating cash flow 43 2R INC RASA NW 44 29 Capital Expenditure 49 30 FCF 4631 Terminal value 42 darunt tactar 48 32 PV, FCF 33 Value of fimm (sterling) SO Valuation framework Ready 431051 100CO 180CC 13966 23100 198156 83889 29400 54589 100CO 64589 SOOCO 11500 23099 1.00 23099.24334 EXHIBITS CURRENT PORSCHE JAGUAR DAIMLER-BENZ BMW + A + 95% DCC 1 W AN AutoSaver A 2CD -- Group 8 Format Tell me Home Insert Page Layout Formulas Data Review View Chart Design Share Comments Add Chart Quick Element Layout Change Colors TO Switch Select Row/Column Data / Change Chart Tybe DO Move Chart D48 x f Jaguar 7% 28% 60% 5% Valuation framework EXHIBITS CURRENT PORSCHE JA Chart Area DAIMLER-BENZ BMW + Ready + 1224 DCC 1 W ANP o. AutoSave OFF COD ... Group 8 Home Insert Draw Page Layout Formulas Data Review View Tell me Share Comments v 10 VAA Wraa Text Number SEX TV (A) X [G 8 WS Peste Merge & Center Insert Y $ % ) Format Delete y Conditional Format Cell Formatting as Table Styles Sort Filter Find Select Analyze Data B 1 I U CA fx =047*(D45+D46) = D48 X c D 7 G IT - J K T. H a P R S T 11 V X Y 2 AX AD Prajected 2 3 1 1 Dolanting 1953 1.445 1994 1.350 1985 1986 1987 1988 1.924 1.298 1 274 1.250 1989 1 291 12.0% 17081 18142 21439 ANNO 28893 30121 3.0% 25691 433005 324462 26400 27192 * 28843 29713 12.0% 14782 16567 18555 AND 23275 28068 A 5.0% 17284 255862 18148.2 19065 A 21009 22059 13521 30000 18.0% 31083 583154 United States 2 Growth, unts 3 Volume unils 15260 9 10 Inflation (% 1. 5 Uss price unit 24884 12 8 sales, dollars 13 7 SAAS, Martin 14 15 Rest of the world 16 U Growth, unts (% 17 9 Vol units 13207 18 19 10 Innation (%) 20 11 pr count, storing 21 12 alus, being 22 23 13 war, cost of sunk 24 14 NMVC 23 15 dicuntrale 26 27 Tulal sales, units 28 16 Total revenues 29 30 17 VAT coas 3. 10 Depreciation 13 19 RKD 33 20 Darbution 13300 14 21 Administration 22000 35 36 22 Total Coals 32 38 23 EBIT 30 24 Tax 40 25 EBIAT 25 Depreciation 42 27 Operating cash flow 43 2R INC RASA NW 44 29 Capital Expenditure 49 30 FCF 4631 Terminal value 42 darunt tactar 48 32 PV, FCF 33 Value of fimm (sterling) SO Valuation framework Ready 431051 100CO 180CC 13966 23100 198156 83889 29400 54589 100CO 64589 SOOCO 11500 23099 1.00 23099.24334 EXHIBITS CURRENT PORSCHE JAGUAR DAIMLER-BENZ BMW + A + 95% DCC 1 W AN AutoSaver A 2CD -- Group 8 Format Tell me Home Insert Page Layout Formulas Data Review View Chart Design Share Comments Add Chart Quick Element Layout Change Colors TO Switch Select Row/Column Data / Change Chart Tybe DO Move Chart D48 x f Jaguar 7% 28% 60% 5% Valuation framework EXHIBITS CURRENT PORSCHE JA Chart Area DAIMLER-BENZ BMW + Ready + 1224 DCC 1 W ANP
