Question
Complete DCF valuation using the provided information and assumptions. Management Projections and Assumptions for Synergy Corporation as of 1/1/2020 Item/Year 2020 2021 2022 2023 2024
Complete DCF valuation using the provided information and assumptions.
| Management Projections and Assumptions for Synergy Corporation as of 1/1/2020 | |||||
| Item/Year | 2020 | 2021 | 2022 | 2023 | 2024 |
| Sales (10% annual growth 2020-2024) | $ 100.00 | $ 110.00 | $ 121.00 | $ 133.10 | $ 146.41 |
| CAPX ($mm) | $ 10.00 | $ - | $ 15.00 | $ 15.00 | $ - |
| Depreciation ($mm) | $ 5.00 | $ 6.00 | $ 6.01 | $ 8.00 | $ 10.00 |
| OTHER ASSUMPTIONS | |||||
| Sales for 2019 are $80 million | |||||
| Accounts Rec 12/31/2019 is $15 million | |||||
| Inventory 12/31/2019 is $10 million | |||||
| Accounts Pay 12/31/2019 is $5 million | |||||
| Optimal Leverage ratio is 40% | |||||
| Equity Beta is 1.00 | |||||
| Cost of Debt before tax savings is 6.66% | |||||
| Risk-free rate is 4% | |||||
| Equity Risk Premium is 6% | |||||
| Add-on Size premium is 4% | |||||
| Nominal Perpetuity Growth rate is 6% | |||||
| Expected inflation rate is 3% | |||||
| Nominal ROI in Perpetuity is 18% | |||||
| Number of shares is 12 million | |||||
| Cash as of 12/31/2019 is $33 mm | |||||
| Tax rate is 40% all years | |||||
| Under-funded Pension Liability $87.12 mm | |||||
| Face Value of Debt $200mm | |||||
| Stnd-alone | Synergy | ||||
| EBIT margin thru 2024 | 50.0% | 55.1% | |||
| EBIT margin after 12/31/2024 | 40.0% | 44.0% | |||
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