Question
You are provided the following information about ABC Company: Net profit Margin = 22% Sales in Year 0 = 15 m Fixed Capital Investment in
You are provided the following information about ABC Company: Net profit Margin = 22% Sales in Year 0 = 15 m Fixed Capital Investment in Year 0 = 4m Depreciation in Year 0 = 5m Working capital investment as a percentage of sales = 8.5% Tax rate = 40% Interest expense of pay value of debt of $20m in Year 0 = 11.5% WACC during the high growth phase (Year 1-5) = 19% WACC during the mature phase = 16% Net income, fixed capital investment, depreciation, interest expense, and sales are expected to grow at a rate of 12% for the next 5 years and then stabilize at a long-term constant growth rate of 6%. Compute the value of the firm.
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