Mr.

A has been given a task to calculate the intrinsic value and cost of equity of a company which has
100000 shares outstanding and each share is being sold for 48 Rs. Per share. Company has earned
750000 Rs. Operating profit this year which is 35% of sales. Company has T. ASSETS Turnover of 3.
Amongst total assets company has 35% current assets and has 2.1 current ratio. Current liabilities
represent 45% of total liabilities. Company pays 13% interest on long-term liabilities. Last year total
assets were 5% less than current year’s total assets. Current assets of -2 year were 2% less than -1
years current assets. Fixed assets of -3 year were 1% greater than fixed assets of -2 years fixed assets.
T. assets of -4 year were 2% less than total assets of -3 year. Operating profit of -5 year was 1% less
than operating profit of -4 year, T.sale of -6 year was 1% greater than -5 years T. sale. STL of -7 year
were 2% less than STL of -6 year. T.Assets of -8 year were 1% less than T.assets of -7 year. All of the
ratios were same throughout these years. Company charges 15% depreciation on its fixed assets. Mr.
A decided to go with free cash flow model when RRR in the market is 14%. You are required to help
Mr. A in the calculation of IV and Ke assuming

1- Company is at its maturity stage.

2- Company constant growth calculated on the basis of last 6 years growth in FCF.
3- Company will grow in the patch of first two years than in the patch of next 3 years and than in
the remaining years and would grow constantly in the patch of last five years.