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Sampa Vide

This document summarizes financial projections for a company from 2000 to 2006 including estimated sales, EBITDA, depreciation, operating profit, net income, capital expenditures, and free cash flow. It then provides details on the company's cost of equity and debt, tax rates, and asset betas to calculate the net present value of the project under different capital structure scenarios, including an all-equity structure and a structure with 17% debt. The net present value is estimated to be $1,228 under the all-equity structure and $1,924 with 17% debt financing.

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Varun Baxi
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77 views9 pages

Sampa Vide

This document summarizes financial projections for a company from 2000 to 2006 including estimated sales, EBITDA, depreciation, operating profit, net income, capital expenditures, and free cash flow. It then provides details on the company's cost of equity and debt, tax rates, and asset betas to calculate the net present value of the project under different capital structure scenarios, including an all-equity structure and a structure with 17% debt. The net present value is estimated to be $1,228 under the all-equity structure and $1,924 with 17% debt financing.

Uploaded by

Varun Baxi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd

INFORMATION GIVEN

FY 2000
Sales
EBITDA
Depreciation
Operating Profit
Net Income

Increase in Annual Growth Revenue


Free Cash Flow Growth
Upfront Investment Required

$22,500
$2,500
$1,100
$1,400
$660

10% Over 5yrs


5%
$1.5mm

2002E

2003E

2004E

2005E

2006E

Sales
EBITDA
(Depreciation)
EBIT
(Tax Expense)
EBIAT
CAPEX
Investment in Working Capital

$1,200
$180
($200)
($20)
$8
($12)
$300
$0

$2,400
$360
($225)
$135
($54)
$81
$300
$0

$3,900
$585
($250)
$335
($134)
$201
$300
$0

$5,600
$840
($275)
$565
($226)
$339
$300
$0

$7,500
$1,125
($300)
$825
($330)
$495
$300
$0

Risk-free Rate (Rf)


Project Cost of Debt (Rd)
Market Risk Premium
Marginal Corporate Tax Rate
Project Debt Beta (d)
Asset Beta

5.0%
6.8%
7.2%
40%
0.25
1.50

Full Equity Financed Scenario


Asset Beta
Cash Flow Growth rate
Risk Free Rate of Return
Market Risk Premium
Cost Of Equity
Initial Investment
Cost Of Debt

1.5
5%
5%
7.20%
15.80% 0% Debt
1500
6.80%

Project Debt Beta

0.25

Initial Investment

2002E

2003E

2004E

2005E

$1,200
$180
($200)
($20)
$8
($12)
$300
$0

$2,400
$360
($225)
$135
($54)
$81
$300
$0

$3,900
$585
($250)
$335
($134)
$201
$300
$0

$5,600
$840
($275)
$565
($226)
$339
$300
$0

($112)
86%
($97)

$6
75%
$4

$151
64%
$97

$314
56%
$175

($1,500)

Sales
EBITDA
Depreciation
EBIT
Tax Expense
EBIAT
CAPEX
Investment in Working
Capital
Free Cash Flow
Discount Factor
Present Value

100%
($1,500)

Total Present Value


NPV

2728.49
1228.49

2006E

Terminal Value

$7,500
$1,125
($300)
$825
($330)
$495
$300
$0
$495
48%
$238

$4,813
48%
$2,311

ADJUSTED PRESENT VALUE (APV) APPROACH

Asset Beta
Cash Flow Growth rate
Risk Free Rate of Return
Market Risk Premium
Cost Of Equity
Initial Investment
Cost of Debt

1.5
5%
5%
7.20%
15.80%
1500
6.80%

Project Debt Beta

0.25

Debt
Cost of Debt
Interest Paid

500
6.80%
34

Initial Investment

Assumption

Planned Debt Financing


Tax Shield
TV
Cost of Debt Capital
PV of Tax Shield
PV of TV of Tax Shield
PV of Tax SHield
NPV of Project
Total Value of Project
Implied Initial D/E Ratio

2003E

2004E

$1,200
$180
($200)
($20)
$8
($12)
$300
$0
($112)

$2,400
$360
($225)
$135
($54)
$81
$300
$0
$6

$3,900
$585
($250)
$335
($134)
$201
$300
$0
$151

$500
$13.60

$500
$13.60

$500
$13.60

$11.9

$11.2

($1,500)

Sales
EBITDA
Depreciation
EBIT
Tax Expense
EBIAT
CAPEX
Investment in Working Capital
Free Cash Flow

Total Present Value


NPV

2002E

2728.49
1228.49

6.8%
$12.7
$143.9
$200
$1,428
$2,928
0.17

PPROACH

2005E

2006E Terminal
Value

$5,600
$840
($275)
$565
($226)
$339
$300
$0
$314

$7,500
$1,125
($300)
$825
($330)
$495
$300
$0
$495

$4,813

$500
$13.60

$500
$13.60

$0
$0

$200
$10.5

$9.8

For Perpetual growth by APV value of the project discounted to present date

discounted to present date is sum of only Equity funded value +PV of Tax shield

WACC for constant D/E Ratio


Assumptions
Target D/E
Target D/V
Growth rate TV
Tax Rate
Asset Beta
Debt Beta
Cost Of Debt*
Risk Free Rate (Rf)
Risk Premium
Debt
Equity
Equity Beta
Cost Of Equity
WACC

0.50
0.33
5%
40%
1.5
0.25
6.80%
5%
7.20%
33%
67%
1.95
19.04%
14.05%

0
Years
Initial Investment

($1,500)

Sales
EBITDA

2002E
$1,200
$180
($200)
($20)
$8
($12)
$300

Depreciation
EBIT
Tax Expense
EBIAT
CAPEX
Investment in Working
Capital
Free Cash Flow
Discounting Factor
Present Value
NPV

$0
($112)
100%
($1,500)

1924.96

88%
($98)

ant D/E Ratio

2003E

2004E

2005E

2006E

Terminal

$2,400
$360
($225)
$135
($54)
$81
$300

$3,900
$585
($250)
$335
($134)
$201
$300

$5,600
$840
($275)
$565
($226)
$339
$300

$7,500
$1,125
($300)
$825
($330)
$495
$300

$0

$0

$0

$6

$151

$314

$0
$495

$5,741

77%
$5

67%
$102

59%
$186

52%
$256

52%
$2,975

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