ACCOUNTING-SVA EXERCISE Given: Base sales:
Question # 00128664
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Updated on: 11/05/2015 12:40 AM Due on: 12/05/2015
| FIN 660 | ||||||||||||||||
| SVA EXERCISE | ||||||||||||||||
| Given: | ($ '000) | |||||||||||||||
| Base sales: | $250,000 | |||||||||||||||
| Base year | Fade rate | Yr. 10 and after | Note: Fade rate is the year-to-year reduction in the rate to some steady state rate | |||||||||||||
| Sales growth: | 1.15 | 0.01 | 1.05 | Year 1 = 1.14, year 2 = 1.13, etc. | ||||||||||||
| Operating PM | 0.20 | 0.01 | 0.1 | |||||||||||||
| Fixed capital inv rate | 0.15 | Note: on a per $ of sales basis | ||||||||||||||
| WC inv rate | 0.09 | Note: on a per $ of sales basis | ||||||||||||||
| Cash tax rate | 0.38 | |||||||||||||||
| COC | 0.11 | |||||||||||||||
| Market securities | $20,000 | |||||||||||||||
| Debt | $50,000 | |||||||||||||||
| # shares outstanding | 5,000,000 | |||||||||||||||
| (all dollars in thousands) | ||||||||||||||||
| Year1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | Residual | ||||||
| Sales | $285,000.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| Operating Profit | $54,150.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| NOPAT | $33,573.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| New Investment | $5,250.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| Add'l WC | $3,150.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| Free cash flow | $25,173.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |||||
| PV to year 10 | ||||||||||||||||
| Pv after year 10 | ||||||||||||||||
| 1. Value years 1-10 | ||||||||||||||||
| 2. Value after year 10 | ||||||||||||||||
| Market securities | ||||||||||||||||
| Total Value | ||||||||||||||||
| Less debt | ||||||||||||||||
| 3. Value of equity | ||||||||||||||||
| 4. Value of equity/share | ||||||||||||||||
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Solution: ACCOUNTING-SVA EXERCISE Given: Base sales: