Estimating Wholesome Foods plc's current cost of capital

Mkt Price
No Mkt Val Mkt Val
per Wholesome Foods plc £0.000
*1000 £000 Weighting
unit
Long-term Liabilities:
£108.65 7% Debentures 2025 500 5

Shares & reserves

£1.85 £1 ordinary shares 1200 1200
£2.55 £2 Preference shares 200 100
Profit & loss 1393
£3,293 V0 =

Cost of debt finance, kD

kD :Current Mkt Price is £107.63

DCF Period (Yr) 0 1 2 3 4

Year 2021 2022 2023 2024 2025
tC: Interest (£) 7 7 7 7
0.21 Tax saving 1.47 1.47 1.47 1.47
Redemption (£) 100
Mkt Price (£) 108.65
CF Total (£) 108.65

IRR: After Tax kD

Cost of debt finance, kD

kD :Current Mkt Price is £108.65

Bond Yield Approximation Method

I + [(P' - P0)/n]
kD =
P' + 0.6(P0 – P')

kD =
 After tax kD =

Cost of preference share capital:

kPREF = D0 / P0
kPREF = 0.1 / 2.55
kPREF = 0.03921 or 3.92%

Cost of ordinary share capital:

CAPM approach:
kE = RF + bi (RM - RF) kE

DMS(02) kE = 0.25 + 1.7( 5.25 -0.25 ) =

PNE 8.75%

WACC

Mkt Val
Summary: k
Weighting
kE 0.0000 8.75% 0.00%
kP 0.0000 3.92% 0.00%
kD 0.0000 3.20% 0.00%
0 wacc= 0.00%

Use WACC as DR
 Scotch Mitts V3

Wholesome Organic Foods

INPUT DATA

€/£ 1.16

Initial Values:

Sales Revenue €(k) 900.00

Variable Costs: €(k) 495.00
Labour €(k) 198.00
Other VC €(k) 297.00
Fixed Cost €(k) 180.00
Depreciation pa €(k) 121.00
Interest pa (Bonita SL) €(k) 32.00

Growth Rates:
Sales 1.15
Lab Costs 1.09
Other VC 1.06
Fixed Costs 1.05

Other Data:
Corporate Tax Spain 0.250
Acquisition Cost €(k) 1100.00

Acquisition Cost £(k) 948.28

Factor Pr

Best case Trade Deal 1.15 0.30

Wost case Trade Deal 0.70 0.15

Base Case 1.00 0.55

554273585.xls
 Scotch Mitts V3

Base Case: Bonita Foods SL

1 2 3 4 5

2022 2023 2024 2025 2026 Avg ARR

5yr Projection €(k) €(k) €(k) €(k) €(k)

Sales Revenue 900.00

Variable Costs:

Labour 198.00

Other VC 297.00

Total VC 495.00

Contribution 405.00
Fixed Cost 180.00

Depreciation 121.00

Operating Profit(PBIT) 104.00

Interest 32.00

Profit before Tax 72.00

Corporation Tax 18.00

Profit after Tax 54.00

Net CF 175.00

PV @ 7.34% €(k)
NPV @ 7.34% €(k)

Payback: 175.00

Good Trade Deal

Net CF 201.25 0.00 0.00 0.00 0.00

PV @ 7.34% €(k)
NPV @ 7.34% €(k)

Poor Trade Deal

Net CF 122.50 0.00 0.00 0.00 0.00

PV @ 7.34% €(k)
NPV @ 7.34% €(k)

E(NPV)
Pr NPV
Best Trade Deal 0.30 0.00 0.00
Worst Trade Deal 0.15 0.00 0.00
Base Case 0.55 0.00 0.00

554273585.xls
 Scotch Mitts V3

E(NPV) 0.00

554273585.xls