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growth Model
Base year
Informatio
n Rs in Mn
Revenues 4000
EBIT 8% of
revenures 500
Capex 300
Depn 200
WC as a % of
Revenues 30% 1200 1320 120
Corporate tax
rate 40%
Paid up equity
Capital 300
Market value of
Debt 1250
Input for
High
Growth
Period
Length of
Growth phase 5
g for
Revenues,depn,EBI
T,and capex 10%
WC as % of
Revenues 30%
15 %pre
cost of Debt tax
D=1,E=1 31-Dec
Risk free Rate 13%
Years 1 2
1 Revenues 4400 4840
2 EBIT 550 605
Nopat=E
3 BIT(1-t) 330 363
Sub.
(Capex-
4 Depn) 110 121
WC 1320 1452
change
5 in WC 120 132
6 FCF 100 110
Re=Rf+b(Rm-Rf)
High Growth Period= 0.20998
Pv of FCF+PVof
Therefore ,Value of the firm = Terminal value
ue of the terminal
0
Market Risk
Premium 6%
Equity Beta 1.333
expected g for
Revenues,depn,
EBIT,and capex 6%
WC as % of
Revenues 30% 1200
cost of Debt 15 %pre tax
D=2,E=3
Risk free Rate 12%
Market Risk
Premium 7%
Equity Beta 1.0
3 4 5 Terminal 7
5324 5856.4 6442 6828.6
665.5 732.05 805.26 853.57
$2,587.19
Revenues= Rs 1000 Mn
EBIT= Rs250 Mn
Capex= Rs 295
Depn= Rs.240
WC@ 20%
t= 40%
5-10 Years
From 5-
10Years
growth Rate
rate is
declinig by
Transition Ph 3% per Year
WC 20% of Revenues
D:E 1:1 Pretax cost o 14%
Rf 11%
Rm-Rf 6%
Equity Beta 0.5
WAAC 13 0.13
Revenues,E
BIT,Capex,D
Stable epn 10% 0.10
WC 20%
D=0,E=1
Pretax cost of 12%
Rf 10%
Rm-Rf 6%
Equity Beta 0.1
WAAC 0.16 16%
2.7049 1.7049180328
99.965
250
NOW,
change in
Dep WC Wc FCFF D/E ß
300 250 50 68.75 1.5 1.583
375 312.5 62.5 85.9375 1.5 1.583
468.75 390.625 78.125 107.421875 1.5 1.583
585.9375 488.28125 97.65625 134.277344 1.5 1.583
732.421875 610.3515625 122.070313 167.84668 1.5 1.583
893.5546875 744.62890625 134.277344 219.421387 1.0 1.10
1063.3300781 886.10839844 141.479492 279.421997 1.0 1.10
1233.4628906 1027.8857422 141.777344 346.468384 1.0 1.10
1393.8130664 1161.5108887 133.625146 418.092526 1.0 1.10
1533.194373 1277.6619775 116.151089 490.73835 1.0 1.10
FCFF11= 539.812185510254
11/(WAAC-g) 8996.8697585
2241.3001942 8607.34337
WAAC PV
0.14 60.3070175
0.14 66.1261157
0.14 72.5067058
0.14 79.5029669
0.14 87.1743058
0.13 100.850082
0.13 113.652619
0.13 124.710788
0.13 133.178578
0.13 138.335462