Given the information in the projected income statements , and assuming the projected improvements in working capital (that is, Ideko's working capital requirements though 2010 will be as shown here ), use EBITDA as a multiple to estimate the continuation value in 2010 (reproduce Table 19.15 ), assuming the EBITDA multiple for Ideko remains at 9.1. Infer the EV/ sales and the unlevered and levered P/E ratios implied by the continuation value you calculated. Also assume that Ideko's production plant will require an expansion in 2010, and that the cost of this expansion, $14.2 million, will be added to Ideko's debt in 2010. Ideko's balance sheet for 2005 is shown here Ideko's free cash flows through 2010 are shown here . (Click on the following icon in order to copy its contents into a spreadsheet.) \begin{tabular}{lrrrrrrr} \hline Income Statement ($$00) & 2005 & 2006 & 2007 & 2008 & 2009 & 2010 \\ \hline Sales & 70,300 & 86,619 & 97,532 & 109,559 & 122,801 & 137,372 \\ Cost of Goods Sold & & & & & & \\ Raw Materials & (16,000) & (18,863) & (21,093) & (23,531) & (26,193) & (29,101) \\ Direct Labor Costs & (18,000) & (21,029) & (24,154) & (27,679) & (31,647) & (36,116) \\ \hline Gross Profit & 36,300 & 46,727 & 52,285 & 58,349 & 64,961 & 72,155 \\ Sales and Marketing & (11,250) & (14,353) & (17,575) & (21,331) & (24,462) & (27,365) \\ Administrative & (13,500) & (12,846) & (14,464) & (15,152) & (15,755) & (17,625) \\ EBITDA & 11,550 & 19,528 & 20,246 & 21,866 & 24,744 & 27,165 \\ Depreciation & (5,500) & (5,880) & (5,792) & (5,713) & (5,642) & (6,997) \\ EBIT & 6,050 & 13,648 & 14,454 & 16,153 & 19,102 & 20,168 \\ Interest Expense (n+t) & (75) & (6,860) & (6,860) & (6,860) & (6,860) & (6,860) \\ Pretax Income & 5,975 & 6,788 & 7,594 & 9,293 & 12,242 & 13,308 \\ Income Tax & (2,091) & (2,376) & (2,658) & (3,253) & (4,285) & (4,658) \\ Net Income & 3,884 & 4,412 & 4,936 & 6,040 & 7,957 & 8,650 \\ \hline \end{tabular} (Click on the following icon in order to copy its contents into a spreadsheet.) Working Capital (\$ 000) 2005 2007 2008 2009 2010 Assets Continuation Value Estimate for Ideko Estimated 2005 Balance Sheet Data for Ideko Corporation Balance Sheet ($000) Assets Cash and Equivalents 6,164 Accounts Receivable 53,800 Inventories Total Current Assets Property, Plant, and Equipment 53,800 \begin{tabular}{lr} Goodwill & 72,332 \\ \hline Total Assets & 192,261 \\ \hline \end{tabular} Liabilities and Stockholders' Equity -. Accounts Payable 4,654 \begin{tabular}{lr} Debt & 100,000 \\ \hline Total Liabilities & 104,654 \\ Stockholders' Equity & 87,607 \\ \hline Total Liabilities and Equity & 192,261 \\ \hline \end{tabular} Free Cash Flow (\$000) Net Income Plus: After-tax Interest Expense Unlevered Net Income Plus: Depreciation \begin{tabular}{rrrrr} 4,459 & 4,459 & 4,459 & 4,459 & 4,459 \\ \hline 8,871 & 9,39 & 10,499 & 12,416 & 13,109 \\ 5,880 & 5,792 & 5,713 & 5,642 & 6,997 \end{tabular} Less: Increase in NWC Less: Capital Expenditures Free Cash Flow of Firm Plus: Net Borrowing Less: After-tax Interest Expense Free Cash Flow to Equity \begin{tabular}{rrrrr} 30,854 & (3,656) & (4,054) & (4,596) & (5,081) \\ (5,000) & (5,000) & (5,000) & (5,000) & (19,200) \\ \hline 40,605 & 6,531 & 7,158 & 8,462 & (4,175) \\ & & & & 14,200 \\ \hline \hline \end{tabular} Calculate the continuation value in 2010 below: (Round the dollar amounts to the nearest $000.) Given the information in the projected income statements , and assuming the projected improvements in working capital (that is, Ideko's working capital requirements though 2010 will be as shown here ), use EBITDA as a multiple to estimate the continuation value in 2010 (reproduce Table 19.15 ), assuming the EBITDA multiple for Ideko remains at 9.1. Infer the EV/ sales and the unlevered and levered P/E ratios implied by the continuation value you calculated. Also assume that Ideko's production plant will require an expansion in 2010, and that the cost of this expansion, $14.2 million, will be added to Ideko's debt in 2010. Ideko's balance sheet for 2005 is shown here Ideko's free cash flows through 2010 are shown here . (Click on the following icon in order to copy its contents into a spreadsheet.) \begin{tabular}{lrrrrrrr} \hline Income Statement ($$00) & 2005 & 2006 & 2007 & 2008 & 2009 & 2010 \\ \hline Sales & 70,300 & 86,619 & 97,532 & 109,559 & 122,801 & 137,372 \\ Cost of Goods Sold & & & & & & \\ Raw Materials & (16,000) & (18,863) & (21,093) & (23,531) & (26,193) & (29,101) \\ Direct Labor Costs & (18,000) & (21,029) & (24,154) & (27,679) & (31,647) & (36,116) \\ \hline Gross Profit & 36,300 & 46,727 & 52,285 & 58,349 & 64,961 & 72,155 \\ Sales and Marketing & (11,250) & (14,353) & (17,575) & (21,331) & (24,462) & (27,365) \\ Administrative & (13,500) & (12,846) & (14,464) & (15,152) & (15,755) & (17,625) \\ EBITDA & 11,550 & 19,528 & 20,246 & 21,866 & 24,744 & 27,165 \\ Depreciation & (5,500) & (5,880) & (5,792) & (5,713) & (5,642) & (6,997) \\ EBIT & 6,050 & 13,648 & 14,454 & 16,153 & 19,102 & 20,168 \\ Interest Expense (n+t) & (75) & (6,860) & (6,860) & (6,860) & (6,860) & (6,860) \\ Pretax Income & 5,975 & 6,788 & 7,594 & 9,293 & 12,242 & 13,308 \\ Income Tax & (2,091) & (2,376) & (2,658) & (3,253) & (4,285) & (4,658) \\ Net Income & 3,884 & 4,412 & 4,936 & 6,040 & 7,957 & 8,650 \\ \hline \end{tabular} (Click on the following icon in order to copy its contents into a spreadsheet.) Working Capital (\$ 000) 2005 2007 2008 2009 2010 Assets Continuation Value Estimate for Ideko Estimated 2005 Balance Sheet Data for Ideko Corporation Balance Sheet ($000) Assets Cash and Equivalents 6,164 Accounts Receivable 53,800 Inventories Total Current Assets Property, Plant, and Equipment 53,800 \begin{tabular}{lr} Goodwill & 72,332 \\ \hline Total Assets & 192,261 \\ \hline \end{tabular} Liabilities and Stockholders' Equity -. Accounts Payable 4,654 \begin{tabular}{lr} Debt & 100,000 \\ \hline Total Liabilities & 104,654 \\ Stockholders' Equity & 87,607 \\ \hline Total Liabilities and Equity & 192,261 \\ \hline \end{tabular} Free Cash Flow (\$000) Net Income Plus: After-tax Interest Expense Unlevered Net Income Plus: Depreciation \begin{tabular}{rrrrr} 4,459 & 4,459 & 4,459 & 4,459 & 4,459 \\ \hline 8,871 & 9,39 & 10,499 & 12,416 & 13,109 \\ 5,880 & 5,792 & 5,713 & 5,642 & 6,997 \end{tabular} Less: Increase in NWC Less: Capital Expenditures Free Cash Flow of Firm Plus: Net Borrowing Less: After-tax Interest Expense Free Cash Flow to Equity \begin{tabular}{rrrrr} 30,854 & (3,656) & (4,054) & (4,596) & (5,081) \\ (5,000) & (5,000) & (5,000) & (5,000) & (19,200) \\ \hline 40,605 & 6,531 & 7,158 & 8,462 & (4,175) \\ & & & & 14,200 \\ \hline \hline \end{tabular} Calculate the continuation value in 2010 below: (Round the dollar amounts to the nearest $000.)