Q.2. Balance Sheet Cash Accounts receivable Inventories Total current assets Fixed assets, net Total assets Accounts payable Accruals Bank loan FY20 150,000 120,000 350,000 620,000 300,000 920,000 130,000 50,000 85,000 FY21 70,000 210,000 470,000 750,000 380,000 1,130,000 170,000 70,000 100,000 340,000 Total current liabilities Long-term debt Common stock ($1 par value) Capital Surplus Retained Earnings Total liabilities and equity 265,000 420,000 50,000 200,000 80,000 1,015,000 550,000 50,000 200,000 160,000 1,300,000 Income Statement Net Sales Cost of Goods Sold Gross Profit Marketing General and Administrative Depreciation Earnings Before Interest and Taxes Interest Earnings Before Taxes Income Taxes (40% Rate) Net Income FY20 2,000,000 1,200,000 800,000 192,308 230,769 61,538 315,385 31,000 284,385 113,754 170,631 FY21 2,500,000 1,500,000 1,000,000 218,750 234,375 85,938 460,938 39,000 421,938 168,775 253,163 The financial statements for the year ending 31st March 2020 (FY20) are based on actual results, whereas the forecast are provided for FY21. Determine the equity valuation cash flows for FY21. Further, it is given that FY21 is the steppingstone year and the cash flows are expected to grow at a rate of 8% annually FY22 onwards. The expected rate of return for your firm is 25%. Calculate the Equity Valuation Cashflow for FY21 Calculate the Equity Valuation Cashflow for FY22 and the Terminal Value Calculate the valuation of Magic Inc that your firm is willing to pay for Magic Inc. given your expected rate of return of 25 % 1. 2. 3. Q.2. Balance Sheet Cash Accounts receivable Inventories Total current assets Fixed assets, net Total assets Accounts payable Accruals Bank loan FY20 150,000 120,000 350,000 620,000 300,000 920,000 130,000 50,000 85,000 FY21 70,000 210,000 470,000 750,000 380,000 1,130,000 170,000 70,000 100,000 340,000 Total current liabilities Long-term debt Common stock ($1 par value) Capital Surplus Retained Earnings Total liabilities and equity 265,000 420,000 50,000 200,000 80,000 1,015,000 550,000 50,000 200,000 160,000 1,300,000 Income Statement Net Sales Cost of Goods Sold Gross Profit Marketing General and Administrative Depreciation Earnings Before Interest and Taxes Interest Earnings Before Taxes Income Taxes (40% Rate) Net Income FY20 2,000,000 1,200,000 800,000 192,308 230,769 61,538 315,385 31,000 284,385 113,754 170,631 FY21 2,500,000 1,500,000 1,000,000 218,750 234,375 85,938 460,938 39,000 421,938 168,775 253,163 The financial statements for the year ending 31st March 2020 (FY20) are based on actual results, whereas the forecast are provided for FY21. Determine the equity valuation cash flows for FY21. Further, it is given that FY21 is the steppingstone year and the cash flows are expected to grow at a rate of 8% annually FY22 onwards. The expected rate of return for your firm is 25%. Calculate the Equity Valuation Cashflow for FY21 Calculate the Equity Valuation Cashflow for FY22 and the Terminal Value Calculate the valuation of Magic Inc that your firm is willing to pay for Magic Inc. given your expected rate of return of 25 % 1. 2. 3