$$ Question $1$:

$15$ marks$)$

Based on the data given below, calculate:

a$.$ The FCFF $($Free Cash Flow to the Firm$)$ for the high growth phase and

stable phase

b$.$ The terminal value of the firmBased on the data given below, calculate:

a$.$ The FCFF $($Free Cash Flow to the Firm$)$ for the high growth phase and stable phase

b$.$ The terminal value of the firm

Base year Values $($in lakhs$)$

Revenues $5000$

EBIT $1200$

Capex $400$

Depreciation $250$

Net working Capital $25\%$ of Revenues

Corporate tax $25\%$

Paid up Equity $500$

Market value of Debt $1200$

High growth period $4$ years

Revenues $25\%$

EBIT $25\%$

Depreciation $25\%$

Capex $25\%$

Net working Capital $25\%$

D$/$E ratio $1$:$1$

Cost of debt $6$

Risk free rate $7$

Risk premium $10$

Beta $1\mathrm{.}2$

Stable Phase

Revenues $10\%$

EBIT $10\%$

Depreciation $-$

Capex Zero by adjusting for depreciation

Net working Capital $25$

D$/$E ratio $2$:$3$

Cost of debt $6$

Risk free rate $6$

Risk premium $11$

Beta $1\mathrm{.}1$