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It is the end of 2017 and you are asked to value the XYZ corp. You have the following financials for this firm. 2017 2018

It is the end of 2017 and you are asked to value the XYZ corp. You have the following financials for this firm.

2017

2018

2019

2020

Income Statement

Sales

1,500,000

2,000,100

2,400,000

COGS

1,200,000

1,600,080

1,920,000

Other Expenses (includes dep)

150,000

200,010

240,000

EBIT

150,000

200,010

240,000

Interest Expense

100,000

100,000

100,000

EBT

50,000

100,010

140,000

Tax

17,500

35,004

49,000

Net Income

32,500

65,007

91,000

Selected items of the balance sheet

NetPPE

80,000

100,000

133,340

160,000

AR

100,000

123,288

164,392

197,260

AP

120,000

147,945

197,270

236,712

The tax rate is 35%. You expect sales to grow at 4% from 2020 on. In addition, the cost of capital for this firm is 12%.

QUESTION BELOW:

part a.) What is the FCF for 2020?

part b.) What is the FCF in 2021?

part c.) Assume that FCF will grow at 4% starting from 2021. Compute the present value of the FCFs. What is the enterprise value?

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