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Just stuck on this practice question thank you :) FBB Limited had sales in year 0 of $250,000 with cost of goods sold of $160,000
Just stuck on this practice question thank you :)
FBB Limited had sales in year 0 of $250,000 with cost of goods sold of $160,000 and depreciation at $11,600. They have made projections for their sales for the next three years of $250,000, $248,000 and $256,000. They believe their costs of goods sold will remain at the current level of $160,000 p.a. with the same level of depreciation. The tax rate is 30% p.a. and is paid in the year of income. The WACC for FBB's is 7%, tax is 30% and the long-run (assume perpetual) growth rate after year three is 3%. a) What are the cash flows for FBB's? (2 marks) b) What is the horizon value for FBB's? (2 marks) c) What is the value of FBB's? (2 marks) Step by Step Solution
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