You have the following data and information on PROGRP, a company producing computer systems for use in corporate treasuries: 2023 2024 2025 2026 2022 3330 3580 3848 4137 4447 -13 -14 -15 -16 -17 3317 3566 3833 4121 4430 Forecast EBIT ($m) Interest Expenses ($m) Earning Before Tax ($m) Taxes ($m) Depreciation Expenses ($m) Net CAPEX ($m) Net Changes in NWC ($m) -995 -1070 -1150 -1236 -1329 -1084 -1556 -1762 -1894 -1350 -3590 -1980 -8860 -2710 -1960 1002 1160 1644 -1450 932 Cash flow assumptions and other information: Beyond 2026, competition will have eroded margins and the industry sector will be entering the maturity phase of the industry life cycle. Growth in free cash flow is expected to continue, perpetually, at the expected average rate of growth for the economy of four per cent per annum. PROGRP's sales for 2021 were $8,990 million. For 2022, sales of $10,310 million are forecasted. Earnings for 2021 were $2,404 million, with earnings of $2,530 expected for PROGRP in 2022. The book value of equity was $5,048 million as of the end of 2021, with $670 million PROGRP shares outstanding. PROGRP's interest-bearing debt stood at $425 million at the end of 2021. Corporate taxes are applied at a rate of 30 percent. Currently, the market price per share is $36.1. The after- tax cost of capital (WACC) for PROGRP is 8.65 percent. Comparative industry average pricing ratios are P/S of 2.7, P/E of 13.1 and P/BV of 4.4. a. Develop three market-based relative valuations of the per share value of PROGRP. (6 marks) b. Estimate the Free Cash Flow to the Firm for PROGRP and develop an estimate of the per share value of PROGRP based on free cash flow. (16 marks) C. Based on your valuations in a. and b., do you believe PROGRP to currently be fairly valued on a per share basis? Briefly justify your decision. (3 marks) You have the following data and information on PROGRP, a company producing computer systems for use in corporate treasuries: 2023 2024 2025 2026 2022 3330 3580 3848 4137 4447 -13 -14 -15 -16 -17 3317 3566 3833 4121 4430 Forecast EBIT ($m) Interest Expenses ($m) Earning Before Tax ($m) Taxes ($m) Depreciation Expenses ($m) Net CAPEX ($m) Net Changes in NWC ($m) -995 -1070 -1150 -1236 -1329 -1084 -1556 -1762 -1894 -1350 -3590 -1980 -8860 -2710 -1960 1002 1160 1644 -1450 932 Cash flow assumptions and other information: Beyond 2026, competition will have eroded margins and the industry sector will be entering the maturity phase of the industry life cycle. Growth in free cash flow is expected to continue, perpetually, at the expected average rate of growth for the economy of four per cent per annum. PROGRP's sales for 2021 were $8,990 million. For 2022, sales of $10,310 million are forecasted. Earnings for 2021 were $2,404 million, with earnings of $2,530 expected for PROGRP in 2022. The book value of equity was $5,048 million as of the end of 2021, with $670 million PROGRP shares outstanding. PROGRP's interest-bearing debt stood at $425 million at the end of 2021. Corporate taxes are applied at a rate of 30 percent. Currently, the market price per share is $36.1. The after- tax cost of capital (WACC) for PROGRP is 8.65 percent. Comparative industry average pricing ratios are P/S of 2.7, P/E of 13.1 and P/BV of 4.4. a. Develop three market-based relative valuations of the per share value of PROGRP. (6 marks) b. Estimate the Free Cash Flow to the Firm for PROGRP and develop an estimate of the per share value of PROGRP based on free cash flow. (16 marks) C. Based on your valuations in a. and b., do you believe PROGRP to currently be fairly valued on a per share basis? Briefly justify your decision
