1. At the beginning of its fiscal year 2020, an analyst made the following forecast for ABC, Inc. (in millions of dollars):

	2020	2021	2022	2023
Cash flow from operation	$1,225	$4,320	$2,985	$3,830
Cash investment	695	930	365	990

ABC did not have any short-term and long-term debt at the end of 2020. Assume that free cash flow will grow at 3 percent per year in 2024 and 2025, after that this will grow at 2 percent per year. ABC had 250 million shares outstanding at the end of 2020, trading at $130.65 per share. Using a required return of 10 percent, calculate the following for GM at the beginning of 2020:

1. The enterprise value. [6 marks]
2. Equity value. [1 marks]
3. Equity value per share. [2 marks]
4. Based on your estimate, should investors buy the share of this company? Justify your choice. [3 marks]

2.

1. XYZ Ltd is a family-based private company operating in the pharmaceuticals industry. XYZs management is planning to expand its operations by raising capital through initial public offerings of 450,000 shares. As XYZ is currently unlisted, management doesnt know its current market price. As a first step of understanding XYZs relative value, the management is seeking your advice on the matter. The management has considered the following five pharmaceuticals companies from 2019.

Company	Share Price	Shares Outstanding	Book Value	Sales revenue	R&D	Net Earnings
Wipe Corp	3.25	1,950,000	4,890,132	1,450,650	950,726	238,000
Kleen Inc	60.38	145,000	6,220,550	1,090,200	852,980	287,940
Sani Group	25.32	469,500	5,990,000	850,000	469,420	124,000
SA Group	105.29	24,500	589,400	1,650,232	1,150,000	153,920
Blue Crop	15.87	845,670	9,883,260	2,476,000	986,450	328,990
XYZ	?	?	6,750,550	1,500,650	975,000	468,955

Using these numbers:

1. Calculate relevant multiples. [8 marks]
2. Estimate a value for XYZ. [2 marks]
3. What should be the value per share of XYZ? [2 marks]
4. If XYZ management is hoping for the initial share price to be $35, should management continue with the initial public offering? [2 marks]
5. What are the limitations of the analysis? [3 marks]

3.

1. Surfers SG is a privately listed company, and it has purchased construction machinery in 2019. They are interested on the impact that double declining depreciation will have on the income statement and balance sheet compared to straight-line depreciation.

Outline the impact of the double declining method compared to the straight-line method on the income statement and balance sheet (Use ratios to provide justification).