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Posted on Jul 30, 2024

growth rate is 5%, return on the bonds is 8%, risk free returnnis 8%, market risk premium is 8%,tax is 30% and cost of debenture

growth rate is 5%, return on the bonds is 8%, risk free returnnis 8%, market risk premium is 8%,tax is 30% and cost of debenture is 8% image text in transcribed

Exhibit 1 PROJECTED INCOME STATEMENT ('000) Yoar 1 2 3 4 4400 2400 5900 3300 Revenue Expenses EBITDA Interest Payments @ 8% Depreciation @ 15% Profit Before Tax Tax @ 30% Profit After Tax 2000 165 900 935 281 655 4900 2700 2200 175 945 1080 324 756 5400 3000 2400 185 983 1232 370 862 2600 194 1016 1390 417 973 5 6400 3600 2800 202 1043 1554 466 1088 Source: Compiled by author. Source: Compiled by author. Exhibit 2 PROJECTED BALANCE SHEET ('000) Yoar Equity Debt Total Liabilities 0 6000 2000 8000 1 6375 2125 8500 2 6754 2251 9005 7104 2368 9472 7429 2476 9906 7734 2578 10313 6000 7200 8400 9600 10800 12000 0 900 1845 2828 3844 4887 Gross Fixed Assets Less Accumulated Depreciation Net Fixed Assets Working Capital Total Assets 6000 2000 8000 6300 2200 8500 6555 2450 9005 6772 2700 9472 6956 2950 9906 7113 3200 10313 Source: Compiled by author. Exhibit 3 PARTICULARS OF FOOD AND FOOD PROCESSING COMPANIES IN S&P CNX 500 INDEX Year Ending Company Face Book Valug Value (Rs.) (Rs.) M Cap (Rs. million) Net Income (Rs. million) Equity Debt (Rs. (Rs. million) million) Equity Beta Advanta India Ltd. Dec-11 10 222.1 8,704.0 142.2 3,744.2 5,738.3 0.5472 Mar-12 2 43.5 58,237.8 1678.7 5,200.4 281.5 0.2638 Dec-11 10 272 121,160.1 3,552 11,441.8 0 0.0959 Britannia Industries Ltd. GlaxoSmithkline Consumer Healthcare Ltd. Jubilant Foodworks Ltd. Kwality Dairy (India) Ltd. Mar-12 10 46 74,938.8 1073.4 2,995.5 0 0.9856 1 Mar-12 8.9 6,116.3 910.5 909.9 4,248 0.6357 1 Mar-12 26.6 8,966.9 Rel Agro Ltd. 2,3474 23,611.8 38,540.5 0.5393 336.3 10 985.7 Mar-12 351.6 3,157.9 4,669.2 0.669 Venky's (India) Ltd. 10 47.8 Mar-12 676.5 15,336.9 1.868.6 0 0.5372 Zydus Wellness Ltd. Source: Compiled by author Frozen Food Products: Cost of Capital - Case Assignment This case is clue at the beginning of the next dass period. Please create 2 copies of your answers, one copy to turn in, and one copy to keep for yourself. 1. Calculate the unlevered beta (b) for each of the comparable firms that are in the same industry as Frozen Foods Products 2. Calculate the industry median unlevered beta 3. Estimate the industry discount rate (U) using the unlevered beta. Calculate the operating cash flows, increase in NWC and FCF for years 1-5. 5. The case gives a growth rate of 5% for the FCFs after year 5. Use this to calculate the value at year 5 of all of the future CFs. using the growing perpetuity formula. 6. Sum FCF 1-5 (step 4) with the value of the year 5 FCFs (step 5). 7. Estimate the annuity factor for each year. 8. Calculate the PV of each year's total FCF 9. Sum the step 8 CFs to calculate the NPV. 4 Exhibit 1 PROJECTED INCOME STATEMENT ('000) Yoar 1 2 3 4 4400 2400 5900 3300 Revenue Expenses EBITDA Interest Payments @ 8% Depreciation @ 15% Profit Before Tax Tax @ 30% Profit After Tax 2000 165 900 935 281 655 4900 2700 2200 175 945 1080 324 756 5400 3000 2400 185 983 1232 370 862 2600 194 1016 1390 417 973 5 6400 3600 2800 202 1043 1554 466 1088 Source: Compiled by author. Source: Compiled by author. Exhibit 2 PROJECTED BALANCE SHEET ('000) Yoar Equity Debt Total Liabilities 0 6000 2000 8000 1 6375 2125 8500 2 6754 2251 9005 7104 2368 9472 7429 2476 9906 7734 2578 10313 6000 7200 8400 9600 10800 12000 0 900 1845 2828 3844 4887 Gross Fixed Assets Less Accumulated Depreciation Net Fixed Assets Working Capital Total Assets 6000 2000 8000 6300 2200 8500 6555 2450 9005 6772 2700 9472 6956 2950 9906 7113 3200 10313 Source: Compiled by author. Exhibit 3 PARTICULARS OF FOOD AND FOOD PROCESSING COMPANIES IN S&P CNX 500 INDEX Year Ending Company Face Book Valug Value (Rs.) (Rs.) M Cap (Rs. million) Net Income (Rs. million) Equity Debt (Rs. (Rs. million) million) Equity Beta Advanta India Ltd. Dec-11 10 222.1 8,704.0 142.2 3,744.2 5,738.3 0.5472 Mar-12 2 43.5 58,237.8 1678.7 5,200.4 281.5 0.2638 Dec-11 10 272 121,160.1 3,552 11,441.8 0 0.0959 Britannia Industries Ltd. GlaxoSmithkline Consumer Healthcare Ltd. Jubilant Foodworks Ltd. Kwality Dairy (India) Ltd. Mar-12 10 46 74,938.8 1073.4 2,995.5 0 0.9856 1 Mar-12 8.9 6,116.3 910.5 909.9 4,248 0.6357 1 Mar-12 26.6 8,966.9 Rel Agro Ltd. 2,3474 23,611.8 38,540.5 0.5393 336.3 10 985.7 Mar-12 351.6 3,157.9 4,669.2 0.669 Venky's (India) Ltd. 10 47.8 Mar-12 676.5 15,336.9 1.868.6 0 0.5372 Zydus Wellness Ltd. Source: Compiled by author Frozen Food Products: Cost of Capital - Case Assignment This case is clue at the beginning of the next dass period. Please create 2 copies of your answers, one copy to turn in, and one copy to keep for yourself. 1. Calculate the unlevered beta (b) for each of the comparable firms that are in the same industry as Frozen Foods Products 2. Calculate the industry median unlevered beta 3. Estimate the industry discount rate (U) using the unlevered beta. Calculate the operating cash flows, increase in NWC and FCF for years 1-5. 5. The case gives a growth rate of 5% for the FCFs after year 5. Use this to calculate the value at year 5 of all of the future CFs. using the growing perpetuity formula. 6. Sum FCF 1-5 (step 4) with the value of the year 5 FCFs (step 5). 7. Estimate the annuity factor for each year. 8. Calculate the PV of each year's total FCF 9. Sum the step 8 CFs to calculate the NPV. 4