ome Insert Draw Page La Formulas Data Review ture Form C Body 25 Wrap Text aste Mergea ce K mraz 1 A B D E F G H 1. The management board of the ABC company is thinking of implementing a new strategy which entails making certain investment expenses. However, the forecast says that investment would translate into an increase of revenues, Valuation for the company without including the strategy has shown that the value of equity (E) of the ABC company amounts to PLN 5 million. without strategy E (equity) 5 000 thousand PLN Dat beginning of period 200 thousand PLN V(value of indebted company) 5 200 thousand PLN The accounting balance sheet of ABC company is presented below: Assets Fixed assets Current assets Inventories Accounts receivable Cash Total assets OB. 5 200 900 300 300 300 6 100 Liabilities and equity Stockholder's equity Common Stock Capital surplus / Accum. Retain earning Net Incom Liabilities Long-term debt Accounts payable Total liabilities and stockholder's equity OB. 5 700 5 000 500 200 400 200 200 3 6 100 2 3 1 5 Forecast of economic values assuming the strategy is implemented in thousand 1 Ready 9 Edit View Microsoft Teams AutoSave View Review Picture F Data Formulas ome Insert Draw Page Layout 3b Wrap X Calibri (body) A Merge B Paste araz 1 X J G D E F H B A 200 200 Long-term debt Accounts payable Total liabilities and stockholder's equity 6 100 Forecast of economic values assuming the strategy is implemented in thousand Year 3 Sales revenues Operating costs, less depreciation Depreciation 32 123 Year 1 22 125 17 111 400 Year 2 23 500 18 000 28 231 1 142 1 270 1 706 1997 2437 Investments into fixed assets Working capital investment 1 112 505 111 The market value of non-operating assets (fixed assets and securities which are not needed for FCF creation) is 300 thousand. The average expected rate of return by all capital providers (WACC) amounts to 12%. Starting value of interest-bearing debt is 200 thousand zloty. The market data suggests that after 3 years, the free cash flows should reach a stable level. Tax rate = 19%. a) On the basis of the planned results please determine if the strategy would increase value for its owners (equity value) (20 marks) b) Estimate value of one share taking into consideration that ABC issued 1 000 thousand shares. (5 marks) ome Insert Draw Page La Formulas Data Review ture Form C Body 25 Wrap Text aste Mergea ce K mraz 1 A B D E F G H 1. The management board of the ABC company is thinking of implementing a new strategy which entails making certain investment expenses. However, the forecast says that investment would translate into an increase of revenues, Valuation for the company without including the strategy has shown that the value of equity (E) of the ABC company amounts to PLN 5 million. without strategy E (equity) 5 000 thousand PLN Dat beginning of period 200 thousand PLN V(value of indebted company) 5 200 thousand PLN The accounting balance sheet of ABC company is presented below: Assets Fixed assets Current assets Inventories Accounts receivable Cash Total assets OB. 5 200 900 300 300 300 6 100 Liabilities and equity Stockholder's equity Common Stock Capital surplus / Accum. Retain earning Net Incom Liabilities Long-term debt Accounts payable Total liabilities and stockholder's equity OB. 5 700 5 000 500 200 400 200 200 3 6 100 2 3 1 5 Forecast of economic values assuming the strategy is implemented in thousand 1 Ready 9 Edit View Microsoft Teams AutoSave View Review Picture F Data Formulas ome Insert Draw Page Layout 3b Wrap X Calibri (body) A Merge B Paste araz 1 X J G D E F H B A 200 200 Long-term debt Accounts payable Total liabilities and stockholder's equity 6 100 Forecast of economic values assuming the strategy is implemented in thousand Year 3 Sales revenues Operating costs, less depreciation Depreciation 32 123 Year 1 22 125 17 111 400 Year 2 23 500 18 000 28 231 1 142 1 270 1 706 1997 2437 Investments into fixed assets Working capital investment 1 112 505 111 The market value of non-operating assets (fixed assets and securities which are not needed for FCF creation) is 300 thousand. The average expected rate of return by all capital providers (WACC) amounts to 12%. Starting value of interest-bearing debt is 200 thousand zloty. The market data suggests that after 3 years, the free cash flows should reach a stable level. Tax rate = 19%. a) On the basis of the planned results please determine if the strategy would increase value for its owners (equity value) (20 marks) b) Estimate value of one share taking into consideration that ABC issued 1 000 thousand shares