Compute for the company's target price in 2018.

Problem 1 It is now 2024. You have been assigned as a financial advisor of a Philippine start-up company. They assigned you to value its existing business had they exited the market 6 years ago, meaning in 2018. Details of the company are as follows: Further assume that the company will not exist beyond 2023, meaning the going concern principle will not apply. Also assume that the client wants you to use the dividend discount model for this project. 2018 2019 2020 2021 2023 Sales 6,458,000.0 7,412,000.0 8,126,000.0 8,941,000.0 9,457,000.0 10,025,000.0 Variable expenses 38.0% 40.0% 41.0% 40.0% 42.0% 44.0% Fixed expenses 29.0% 31.0% 30.0% 30.0% 28.0% 30.0% Tax Rate 21.0% 25.0% 24.0% 25.0% 30.0% 30.0% 2022 After conducting a financial due diligence, you found that: 1.) 2019 sales are inclusive of a 250,000 sales invoice that were in transit as of EOY 2019, thus delivered to the client on 2020, with terms of FOB Shipping Point. 2.) 2020 sales excluded a contract signed for services worth 1,200,000. Contract is dated December 11, 2020, total cash was paid outright, but services will be rendered starting 2021. Contract is for a one year term only. 3.) 2020 internal audit findings revealed that 175,000 worth of sales invoice were backdated (original date is January 15, 2021) to boost 2020 sales. 4.) 257,000 worth of 2019 sales were revealed as window dressed sales (sales invoice dated January 22, 2020). 5.) 2018 sales are inclusive of a 450,000 cash collection of a previously written off account. 6.) 2018 sales (considered consolidated unless otherwise stated) are inclusive of a 354,000 Home Office Sale to Branch X. 7.) 2019-2021 office supplies were expensed initially, as part of variable expenses. No adjustments were made. Details of the EOY office supplies on hand are as follows: 2019 2020 2021 Office Supplies 56,450.0 62, 157.0 75, 154.0 8.) 2018 Revenues worth 300,000 were recorded. However, after careful analysis, you found out that only 30% of this revenue contract was performed. With regards to this contract, the auditors advised your client to use percentage of completion method. 9.) A 2020 250,000 PPE was treated as expense when acquired. No adjustments were made in 2020 onwards. (General rule: Use straight line depreciation with no salvage value UNLESS specifically stated) EUL: 5 years Additional company details are as follows: a.) The company has a retention rate of 75%, and increased it to 80% last 2021. b.) Market return: 12.52% C.) 20 year Treasury bond rate: 4.12% d.) The company's target D/E structure is 33% Your team filtered 3 main comparables for your target company. Details of which are as follows: Comparable A Comparable B Total asset turnover 2.5x Return on equity 15.0% Total equity turnover 3.5x Total asset turnovi 0.9x Equity beta 1.20 Net income ratio 11.0% Tax rate 35.0% Equity beta 0.9 Tax rate 40.0% Comparable C Return on equity 18.0% Total asset turnover 2.4x Mark up on cost 1/3 Gross Profit 19,000,000.0 Operating expenses 15,000,000.0 Equity beta 1.2 Tax rate 35.0% Problem 1 It is now 2024. You have been assigned as a financial advisor of a Philippine start-up company. They assigned you to value its existing business had they exited the market 6 years ago, meaning in 2018. Details of the company are as follows: Further assume that the company will not exist beyond 2023, meaning the going concern principle will not apply. Also assume that the client wants you to use the dividend discount model for this project. 2018 2019 2020 2021 2023 Sales 6,458,000.0 7,412,000.0 8,126,000.0 8,941,000.0 9,457,000.0 10,025,000.0 Variable expenses 38.0% 40.0% 41.0% 40.0% 42.0% 44.0% Fixed expenses 29.0% 31.0% 30.0% 30.0% 28.0% 30.0% Tax Rate 21.0% 25.0% 24.0% 25.0% 30.0% 30.0% 2022 After conducting a financial due diligence, you found that: 1.) 2019 sales are inclusive of a 250,000 sales invoice that were in transit as of EOY 2019, thus delivered to the client on 2020, with terms of FOB Shipping Point. 2.) 2020 sales excluded a contract signed for services worth 1,200,000. Contract is dated December 11, 2020, total cash was paid outright, but services will be rendered starting 2021. Contract is for a one year term only. 3.) 2020 internal audit findings revealed that 175,000 worth of sales invoice were backdated (original date is January 15, 2021) to boost 2020 sales. 4.) 257,000 worth of 2019 sales were revealed as window dressed sales (sales invoice dated January 22, 2020). 5.) 2018 sales are inclusive of a 450,000 cash collection of a previously written off account. 6.) 2018 sales (considered consolidated unless otherwise stated) are inclusive of a 354,000 Home Office Sale to Branch X. 7.) 2019-2021 office supplies were expensed initially, as part of variable expenses. No adjustments were made. Details of the EOY office supplies on hand are as follows: 2019 2020 2021 Office Supplies 56,450.0 62, 157.0 75, 154.0 8.) 2018 Revenues worth 300,000 were recorded. However, after careful analysis, you found out that only 30% of this revenue contract was performed. With regards to this contract, the auditors advised your client to use percentage of completion method. 9.) A 2020 250,000 PPE was treated as expense when acquired. No adjustments were made in 2020 onwards. (General rule: Use straight line depreciation with no salvage value UNLESS specifically stated) EUL: 5 years Additional company details are as follows: a.) The company has a retention rate of 75%, and increased it to 80% last 2021. b.) Market return: 12.52% C.) 20 year Treasury bond rate: 4.12% d.) The company's target D/E structure is 33% Your team filtered 3 main comparables for your target company. Details of which are as follows: Comparable A Comparable B Total asset turnover 2.5x Return on equity 15.0% Total equity turnover 3.5x Total asset turnovi 0.9x Equity beta 1.20 Net income ratio 11.0% Tax rate 35.0% Equity beta 0.9 Tax rate 40.0% Comparable C Return on equity 18.0% Total asset turnover 2.4x Mark up on cost 1/3 Gross Profit 19,000,000.0 Operating expenses 15,000,000.0 Equity beta 1.2 Tax rate 35.0%