Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider the information provided in the following table. Using the additional information provided at the bottom, calculate the value of the firm using FCFF method.
- Consider the information provided in the following table. Using the additional information provided at the bottom, calculate the value of the firm using FCFF method. [15]
| Year | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| Total Assets | 10000 |
|
|
|
|
|
|
| Fixed Assets | 8000 |
|
|
|
|
|
|
| Current assets | 2000 |
|
|
|
|
|
|
| Debt | 4000 |
|
|
|
|
|
|
| Equity | 5000 |
|
|
|
|
|
|
| Current liabilities | 1000 |
|
|
|
|
|
|
| Sales | 15000 |
|
|
|
|
|
|
| Operating expenses | 12000 |
|
|
|
|
|
|
| EBIT | 3000 |
|
|
|
|
|
|
| Int | 400 |
|
|
|
|
|
|
| PBT | 2600 |
|
|
|
|
|
|
| Tax(25%) | 650 |
|
|
|
|
|
|
| PAT | 1950 |
|
|
|
|
|
|
- For first five years, growth rate is sales in 5% and from sixth year onwards it is 3%
- The asset turnover ratio remains constant
- The total debt to total asset ratio remains constant
- The depreciation rate is 25% and is already included in the operating expenses
- The ratio of operating expenses to sales remains constant
- The ratio of fixed assets to total assets remains constant
- The cost of capital for this firm is 15%
- The current ratio remains constant
- If you feel that some information is not provided, make some assumptions and write your assumptions in bold letters
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started