The ETERNA AG is a very successful company. For the future further increases in earnings are expected and an indefinite time horizon is assumed for the company. For the last fiscal year (period 0) the ETERNA AG published the following income statement figures:

The other operating income resulted of income statement-related reversal of provisions.

The interest expenses of 1.2 MEUR related to a roll-over loan of 20.0 MEUR with an interest rate of 6% p.a. For the future the following assumptions apply: - constant interest rate of 6% p.a. - constant borrowings of 20.0 MEUR The debt ratio is 50% (debt / total capital) and should stay constant for the future. The earnings are related to revenue while the expenses are related to the following positions: - personnel expenses - other operating expenses - interest and tax expenses Both, the earnings and the expenses are completely cash effective. The forecast period should cover the next 5 periods. For the forecast period the following changes of the income and expenses should be considered:

Based on the prepared budgeted balance sheets for the forecast period of 5 years the following (targeted) changes of the fixed and the current assets (increases -; decreases +) should be assumed:

The free cash flow (FCF) of the periods is used for the interest payments to the creditors and for dividend distributions to the shareholders. Additional payments between the ETERNA AG and its shareholders (increase in share capital/reduction of share capital) are not planned.

Questions: a. Please calculate the gross cash flow for the last period (period 0)? b. What is the expected gross cash flow for the 5 forecast periods? Please calculate also the free cash flow for the periods! c. The ETERNA AGs business activities are very economic cycle sensitive. The beta coefficient of 1.5 reflects the high-risk business of the ETERNA AG. What will be ETERNA AGs - favoured interest rate on borrowings idebt=? - favoured equity yield iequity=?, - WACC itc=?, For the calculation of the WACC the following conditions should be considered: - Risk-free rate irf =4% p.a. - Company specific risk-premium 2% - Interest rate of the market portfolios m = 8% p.a. - Equity ratio of 50% - Ignore tax shield - Hint: Use m irf = 4% as market risk premium; Use irf + 2% comp. specific risk prem. for iequity d. What is the shareholder value of the ETERNA AG (Hint: for the indefinite term after the forecast period a constant free cash flow on the level of the last forecast period can be assumed)?

\begin{tabular}{lc} Income Statement (Period 0, figures in MEUR) \\ \hline Revenue & 10.000 \\ \hline + other operating income & 500 \\ \hline - personnel Expenses & 3.000 \\ \hline - depreciation & 2.300 \\ \hline - other operating expenses & 2.000 \\ \hline - interest expenses & 1.200 \\ \hline \hline = Earning before Tax (EBT) & 2.000 \\ \hline + extraordinary income & 84 \\ \hline - extraordinary expenses & 114 \\ \hline - other tax & 30 \\ \hline - income tax & 200 \\ \hline \hline = Net income for the period & 1.740 \end{tabular} \begin{tabular}{lr} Income Statement item & Period-to-period changes \\ \hline Revenue & 10,0% \\ \hline Personnel Expenses & 9,0% \\ \hline Other operating expenses & 4,0% \\ \hline Other tax & 0,0% \\ \hline Income tax & 12,0% \end{tabular} \begin{tabular}{lrrrrr} Forecast period & (1) & (2) & (3) & (4) & (5) \\ \hline Fixed assets (increase -/decrease + ) & -3.000 & -2.600 & -1.500 & -2.800 & -5.500 \\ \hline Current assets (increase -/decrease + ) & -396 & +8 & -364 & +79 & -174 \end{tabular}