Estimate the residual value and perform firm valuation

Assignment Help Financial Management
Reference no: EM13533

Consider the following data for ABC enterprises (all numbers in €):

  • Today is January 1, 2013
  • Income statement for 2012 shows:
    • Revenues for 500,000
    • Cost of Goods sold: 350,000
    • General & Administrative Costs 25,000
  • Applicable tax rate = 35%
  • Investment in working capital for 2013 is expected to amount to 20,000 and capex will be 40,000.
  • Depreciation that same year has been estimated at 15,000.
  • Evolution of the above magnitudes is expected to be the following:
    • Revenues is expected to grow at a rate of 5% until 2017
    • Cost of goods sold: 70% of revenues
    • G&A costs: 5% of revenues
    • Investment in working capital is expected to grow at a rate of 5% until 2017
    • Both CAPEX and depreciation are expected to follow the same growth rates which are: 4% until 2015 and 2% the two years after that.

With respect to the cost of capital, available data is the following:

  • The firm's balance sheet shows 200,000 in financial debt which bears an interest rate of 5% and 500,000 in equity.
  • Industry's average unlevered beta = 1.13
  • Market risk premium = 7%
  • Government bond with 20 years´ maturity stands at 3%

Forecast cash flows for 2013 - 2017, estimate the Residual Value and perform the corresponding firm valuation.

Reference no: EM13533

Questions Cloud

Develop a reliable transfer protocol over udp : Develop a reliable transfer protocol over UDP. Focus on a Stop- and-Wait protocol.
Create a web site for an apple farm : Create a web site for an apple farm. Create an HTML5 form allowing visitors to create an account with the site. Account details are to be stored in your MySQL database. Information should be stored in a secure way.
Stock market project : Select five companies for the purpose of tracking the stock market, preparing research on the companies, and preparing company reports.
Shopping cart program for web applications class : Shopping Cart program for web applications class. Allows user to browse while keeping track of the items in which they will purchase at the end on the order page link and this will give a final price for all items.
Estimate the residual value and perform firm valuation : Estimate the Residual Value and perform the corresponding firm valuation.
Write a report on im operations governance : Write a report on IM operations governance
Issues in telecommunications : Creating, sharing, and managing knowledge for innovation and Service - Managing service strategies and service innovation.
Describe the types of financial ratios : Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.
Calculate and plot the error in the numerical derivative : Write a program to calculate and plot the error in the numerical estimate of the derivative.

Reviews

Write a Review

 

Financial Management Questions & Answers

  Draw up balance sheet and income statement

Draw up balance sheet and income statement.

  Determine the constant growth rate in dividends

Arbitrage Financial is offering two possible investments with the same level of risk.

  Long-term financing needed

How much new long-term debt financing will be needed.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Explain the important characteristics of this index

Develop an insight into the pricing of financial instruments

  Find the annual withdrawal

Find the Annual withdrawal

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Prepare a business plan

Prepare a business plan that would be useful for launching your product and obtaining financial and managerial support from potential backers.

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Report annual cash flows

Briefly explain why you are using the computational method chosen. (Hint: you will need to decide to use the APV or WACC formula.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd