Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Using the information below, please help fill in this table. Please provide detailed equations, excel formulas, and explanations to better understand this process. Thank You!
Using the information below, please help fill in this table. Please provide detailed equations, excel formulas, and explanations to better understand this process. Thank You!
Question: Using the data provided in the financial statements for Lady M calculate the historical and projected FCFs for years
The two decided to work out some baseline assumptions to value Lady M For the year which was only around halfway over, they assumed the following:
Sales would be around $ million. This was actually quite conservative, considering that sales growth had been the previous year.
Cost of goods sold; sales; general; and administrative SG&A; and research and development R&D expenditures all as a present of sales would behave similarly to
Spatial expenditures would be approximately of sales.
Additions to intangibles would be zero as they also were in and
Amortization would be zero.
The tax rate would be
Working capital increase by $ in $ in and was expected to increase by $ in
In forecasting the next five years, Romaniszyn and Tom assumed the following:
Annual sales growth would be for in since the World Trade Center location would potentially be opening in late and for the three years afterward.
They assumed an annual sales growth rate of in perpetuity.
Cost of goods sold had consistently been approximately of sales but had been dipping in the past two years. They expected it to remain approximately constant over the next five years.
With rent and labor costs making up a large portion of their expenses, Romaniszyn and Tom expected SG&A costs to remain approximately the same as prior years, but to decrease by one percentage point each year.
Although R&D costs had been negligible in the past, they decided they should probably assume some cost in the future as well, albeit only of sales.
With the prospect of opening a new store in the following year, the two decided to allocate $ for capital expenditures in After that, however, they assumed that no new stores would be opened and capital expenditures would remain approximately of sales.
Depreciation was expected to rise by five percentage points each year starting in becoming of capital expenditures in
Additions to intangibles would be zero.
Amortization would be zero.
The tax rate would continue to be
The two expected the change in working capital to remain a constant percent of the change in sales and behave similarly to
In order to do a discounted cash flow analysis, Romaniszyn and Tom assumed Lady Ms weighted average cost of capital was They chose a x EBITDA multiple.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started