PRD SA provides services involving construction and repair of roads and bridges.

Due to the recession in the indus

through construction of a large warehouse on the outskirts of the regional capital city. The facility will be rented. T
project will amount to 9 million and will be incurred in the first year of investment (land plot with the value o
year. PRD will receive the first rental revenue in the second year, and the amount of revenue will be1 million PL
period, the revenue should grow at a rate of 1.5 % per year. Variable costs of administration of the building w
of 150 thousand PLN in the first two years, then they should grow at the rate of estimated inflation i.e. 2%. Sc
of warehouse industry, the repayment period (receivable turnover days) is approximately 15 days. The average b
costs, the average balance of account payables to revenue ratio, 6%. The target capital of the company consists o
specified, but you know that the risk free rate equals 5%, market risk premium 6%, at beta equals 1,2. The compan
building after 20 years of its operation will

0 1
SALES
VARIABLE COST
FIXED COSTS
DEPERCAITION
CAPEX 7,000,000 zł
CONTRIBUTION IN KIND 2,000,000 zł

RECEIVABLE TURNOVER DAYS

RECEIVABLES
INVENTORIES
ACC PAYABLE
WORKING CAPITAL
WORKING CAPITAL INVESTMENT

D/E 60%
E/D 40%
RF 5%
BETA 1.2
COST OF DEBT 10%
TAX 19%
MRP 6%
COST OF EQUITY 12%

WACC 9.74%

RESIDUAL VALUE 2,000,000 zł

YEAR 0 1
FCFF
SALES
VC
FC
DEPRECIATION
EBIT
TAX
NOPAT
DEPRECIATION
CAPEX 2,000,000 zł 7,000,000 zł
WCI
FCFF+RV (2,000,000) zł (7,000,000) zł
D FCFF+RV (2,000,000) zł (6,378,713) zł

CUMULATIVE (2,000,000) zł (9,000,000) zł

NPV (955,279) zł
IRR 8.27%
PP 11.22 -0.22

SESNITITIVTY ANALYSIS
WACC 8.27%

20%
15%
 10%
5%
0%
-5%
-10%
-15%
-20%
 dges. Due to the recession in the industry and the increasing competition, the company's management is considering diversific
capital city. The facility will be rented. The company has signed appropriate letters of intent with potential tenants. It is estima
investment (land plot with the value of 2 million (contribution in kind) at the beginning of the first year and 7 million constr
mount of revenue will be1 million PLN per year. It is assumed that the revenue will grow by 100 thousand PLN per year
sts of administration of the building will reach 5 % of the revenue. Fixed costs, excluding depreciation and amortization,
rate of estimated inflation i.e. 2%. Scheduled depreciation of the building will be 5 % per annum. The conducted market r
approximately 15 days. The average balance of materials necessary to maintain the warehouse operational can reach abou
arget capital of the company consists of 60% of interest-bearing debt of 10% per annum and equity (capital). The rate of return
um 6%, at beta equals 1,2. The company pays 19% income tax. The residual value will include only the planned value of the land
ding after 20 years of its operation will not meet the expectations of potential tenants.

2 3 4 5
1,000,000.00 zł 1,100,000.00 zł 1,200,000.00 zł 1,218,000.00 zł
50,000 zł 55,000 zł 60,000 zł 60,900 zł
150,000 zł 150,000 zł 153,000 zł 156,060 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

15 15 15 15
41,096 zł 45,205 zł 49,315 zł 50,055 zł
1,000 zł 1,100 zł 1,200 zł 1,218 zł
60,000 zł 66,000 zł 72,000 zł 73,080 zł
(17,904) zł (19,695) zł (21,485) zł (21,807) zł
(17,904) zł (1,790) zł (1,790) zł (322) zł
 2 3 4 5

1,000,000.00 zł 1,100,000.00 zł 1,200,000.00 zł 1,218,000.00 zł

50,000 zł 55,000 zł 60,000 zł 60,900 zł
150,000 zł 150,000 zł 153,000 zł 156,060 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł
450,000.00 zł 545,000.00 zł 637,000.00 zł 651,040.00 zł
85,500.00 zł 103,550.00 zł 121,030.00 zł 123,697.60 zł
364,500.00 zł 441,450.00 zł 515,970.00 zł 527,342.40 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

(17,904) zł (1,790) zł (1,790) zł (322) zł

732,404 zł 793,240 zł 867,760 zł 877,665 zł
608,164 zł 600,219 zł 598,329 zł 551,447 zł

(8,267,596) zł (7,474,355) zł (6,606,595) zł (5,728,930) zł

 ny's management is considering diversification of its current operations
intent with potential tenants. It is estimated that the investment in the
ning of the first year and 7 million construction outlays during the first
ill grow by 100 thousand PLN per year in the next two years. After this
cluding depreciation and amortization, are estimated to be at the level
5 % per annum. The conducted market research shows that in the rental
e warehouse operational can reach about 2 % of the planned variable
um and equity (capital). The rate of return required by the owners is not
include only the planned value of the land because it is assumed that the
s.

6 7 8 9
1,236,270.00 zł 1,254,814.05 zł 1,273,636.26 zł 1,292,740.80 zł
61,814 zł 62,741 zł 63,682 zł 64,637 zł
159,181 zł 162,365 zł 165,612 zł 168,924 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

15 15 15 15
50,806 zł 51,568 zł 52,341 zł 53,126 zł
1,236 zł 1,255 zł 1,274 zł 1,293 zł
74,176 zł 75,289 zł 76,418 zł 77,564 zł
(22,134) zł (22,466) zł (22,803) zł (23,145) zł
(327) zł (332) zł (337) zł (342) zł
 6 7 8 9

1,236,270.00 zł 1,254,814.05 zł 1,273,636.26 zł 1,292,740.80 zł

61,814 zł 62,741 zł 63,682 zł 64,637 zł
159,181 zł 162,365 zł 165,612 zł 168,924 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł
665,275.30 zł 679,708.52 zł 694,342.33 zł 709,179.40 zł
126,402.31 zł 129,144.62 zł 131,925.04 zł 134,744.09 zł
538,872.99 zł 550,563.90 zł 562,417.29 zł 574,435.32 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

(327) zł (332) zł (337) zł (342) zł

889,200 zł 900,896 zł 912,754 zł 924,777 zł
509,108 zł 470,024 zł 433,945 zł 400,638 zł

(4,839,730) zł (3,938,834) zł (3,026,080) zł (2,101,303) zł

 10 11 12 13
1,312,131.92 zł 1,331,813.90 zł 1,351,791.10 zł 1,372,067.97 zł
65,607 zł 66,591 zł 67,590 zł 68,603 zł
172,303 zł 175,749 zł 179,264 zł 182,849 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

15 15 15 15
53,923 zł 54,732 zł 55,553 zł 56,386 zł
1,312 zł 1,332 zł 1,352 zł 1,372 zł
78,728 zł 79,909 zł 81,107 zł 82,324 zł
(23,493) zł (23,845) zł (24,203) zł (24,566) zł
(347) zł (352) zł (358) zł (363) zł
 10 11 12 13

1,312,131.92 zł 1,331,813.90 zł 1,351,791.10 zł 1,372,067.97 zł

65,607 zł 66,591 zł 67,590 zł 68,603 zł
172,303 zł 175,749 zł 179,264 zł 182,849 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł
724,222.47 zł 739,474.29 zł 754,937.66 zł 770,615.41 zł
137,602.27 zł 140,500.12 zł 143,438.16 zł 146,416.93 zł
586,620.20 zł 598,974.18 zł 611,499.51 zł 624,198.48 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

(347) zł (352) zł (358) zł (363) zł

936,967 zł 949,327 zł 961,857 zł 974,562 zł
369,892 zł 341,508 zł 315,305 zł 291,115 zł

(1,164,335) zł (215,009) zł 746,848 zł 1,721,410 zł

 14 15 16 17
1,392,648.99 zł 1,413,538.72 zł 1,434,741.81 zł 1,456,262.93 zł
69,632 zł 70,677 zł 71,737 zł 72,813 zł
186,506 zł 190,236 zł 194,041 zł 197,922 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

15 15 15 15
57,232 zł 58,091 zł 58,962 zł 59,846 zł
1,393 zł 1,414 zł 1,435 zł 1,456 zł
83,559 zł 84,812 zł 86,085 zł 87,376 zł
(24,934) zł (25,308) zł (25,688) zł (26,073) zł
(368) zł (374) zł (380) zł (385) zł
 14 15 16 17

1,392,648.99 zł 1,413,538.72 zł 1,434,741.81 zł 1,456,262.93 zł

69,632 zł 70,677 zł 71,737 zł 72,813 zł
186,506 zł 190,236 zł 194,041 zł 197,922 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł
786,510.39 zł 802,625.52 zł 818,963.72 zł 835,527.97 zł
149,436.97 zł 152,498.85 zł 155,603.11 zł 158,750.31 zł
637,073.42 zł 650,126.67 zł 663,360.61 zł 676,777.66 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

(368) zł (374) zł (380) zł (385) zł

987,442 zł 1,000,501 zł 1,013,740 zł 1,027,163 zł
268,783 zł 248,166 zł 229,133 zł 211,561 zł

2,708,852 zł 3,709,353 zł 4,723,093 zł 5,750,256 zł

 18 19 20 21
1,478,106.88 zł 1,500,278.48 zł 1,522,782.66 zł 1,545,624.40 zł
73,905 zł 75,014 zł 76,139 zł 77,281 zł
201,880 zł 205,918 zł 210,036 zł 214,237 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

15 15 15 15
60,744 zł 61,655 zł 62,580 zł 63,519 zł
1,478 zł 1,500 zł 1,523 zł 1,546 zł
88,686 zł 90,017 zł 91,367 zł 92,737 zł
(26,464) zł (26,861) zł (27,264) zł (27,673) zł
(391) zł (397) zł (403) zł (409) zł
 18 19 20 21

1,478,106.88 zł 1,500,278.48 zł 1,522,782.66 zł 1,545,624 zł

73,905 zł 75,014 zł 76,139 zł 77,281 zł
201,880 zł 205,918 zł 210,036 zł 214,237 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł
852,321.28 zł 869,346.70 zł 886,607.31 zł 904,106 zł
161,941.04 zł 165,175.87 zł 168,455.39 zł 171,780 zł
690,380.24 zł 704,170.83 zł 718,151.92 zł 732,326 zł
350,000 zł 350,000 zł 350,000 zł 350,000 zł

(391) zł (397) zł (403) zł (409) zł

1,040,771 zł 1,054,568 zł 1,068,555 zł 3,055,062 zł
195,338 zł 180,360 zł 166,532 zł 433,866 zł

6,791,027 zł 7,845,595 zł 8,914,150 zł 11,969,212 zł

Assets 2016 (E)
Fixed assets 11,233
Current assets 7,466
Inventories 1,000
Accounts receivable 2,222 The Financial Manager of Taxco Co. prepared foreca
Cash 4,244 additional capital is needed to ensure the feasibility of th
- Balance Sheet (6 points)). Please estimate also the val
Total assets 18,699
FCFF by 4000 in the year 2018 repeat the forecasted FCF
for the valuation (7 points). Students wh
Liabilities and equity 2016 (E)
Common Stock 10,000
Capital surplus / Accum. Retain earning 1,233
Net income 1,321
Long-term debt 5,000
Accounts payable 1,145
Total liabilities and stockholder's equity 18,699
0
Forecast 2017 (F)
General, and administrative expenses 5,500
Depreciation 2,000

Tax rate 19%

Accounts payable 200

Planned accounts receivable 1,000
Planned inventories 2,000

Acquisition of fixed assets 10,000

Dividends 1,300
Planned operating revenues 29,000
Cost of goods sold 8,000
Selling costs 3,000
 The Financial Manager of Taxco Co. prepared forecasted financial data for the next year. Is the strategy feasible for Compan
dditional capital is needed to ensure the feasibility of the strategy (please prepare pro forma financial statement: P&L (3 point),
Balance Sheet (6 points)). Please estimate also the value of equity of the company using FCFF and assuming that the company
CFF by 4000 in the year 2018 repeat the forecasted FCFF from year 2018 in the foreseeable future (perpetuity, i.e. g = 0). Please
for the valuation (7 points). Students who will also prepare valuation using EVA method will receive additional 8

P&L 2017
REVENUE 29,000
OPERATIONAL COST EX DEP 14,500
EBITDA 14,500
DEP 2,000
EBIT 12,500
INTEREST 0
EBT 12,500
TAX 2375
NET PROFIT 10,125

CASH FLOW STATEMENT 2017

CASH FLOW FROM OPEARTING ACTIVITIES
NET PROFIT 10,125

DEP 2,000
WCI -723
FINCNCIAL COST
OPERATING CASH FLOW 11,402

CASH FLOW FROM FIANNCING ACTIVITIES 2017

FINANCING CASH FLOW -10,000

CASH FLOW FROM INVESTING ACTIVITIES 2017

CHANGE IN IBD
FINANCIAL COST
DIVIDENDS -1,300
FINVESTING CASH FLOW -1300
CHANGE IN CASH 102
BEG CASH BALANCE 4,244
END CASH BALANCE 4,346
next year. Is the strategy feasible for Company? If not, how much
pro forma financial statement: P&L (3 point), CF statement (9 points)
ny using FCFF and assuming that the company will be able to increase
reseeable future (perpetuity, i.e. g = 0). Please use WACC equals 10%
on using EVA method will receive additional 8 points).

Assets 2016 (E) YEAR 2019

Fixed assets 11,233 19,233 FCFF 1,402
Current assets 7,466 7,346 CV
Inventories 1,000 2,000 FCFF + CV 1,402
Accounts receivable 2,222 1,000 D FCFF+CV 1274.54545
Cash 4,244 4,346
Total assets 18,699 26,579 EV 9797.61082

Liabilities and equity 2016 (E) NOA&CASH 4,244

Common Stock 10,000 10,000
Capital surplus / Accum. Retain
1,233
earning 1,254 V 14,042
Net income 1,321 10,125 D 5,000
Long-term debt 5,000 5,000 E 9,042
Accounts payable 1,145 200
Total liabilities and stockholder's
18,699
equity 26,579

FCFF
REV 29,000
OPERATIONAL COST 14,500
DEP 2,000
EBIT 12,500
TAX 2375
NOPAT 10,125
DEP 2,000
WCI 723
CAPEX 10,000
RV/CV
FCFF 1,402
FCFF
CHANGE IN CASH 102
DIVIDENDS 1,300
CHANGE IN IBD 0
INTEREST AFTER TAX 0
FCFF 1,402
 2020
5,402
4910.90909
10,313
8523.06536
 Please calculate WACC for this company:
http://www.hirsch-gruppe.com/homepage/com/?navid=0
assuming that it is illiquid company (sector Chemical (Specialty))

WACC HITSCH GRUPPE

y))
 The St. Anger Corporation needs to raise $35 million to finance its expansion into new markets. The company wil
sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $31 per share a
the company’s underwriters charge an 8 percent spread, how many shares need to be sold?

INVESTMENT 35,000,000.00 zł
GENERAL CASH OFFERING
OFFER PRICE 31
SPREAD 8%

TOTAL VALUE OF SALE 38,043,478.26 zł

NUMBER OF SHARES SOLD 1,227,208.98 zł
o new markets. The company will
the offer price is $31 per share and
d to be sold?
1. A dividend is paid with funds received from a sale of debt. N
2. Real estate is purchased and paid for with short-term debt. N
3. Inventory is bought on credit. N
4. A short-term bank loan is repaid. D
5. Next year’s taxes are prepaid. D
6. Preferred stock is redeemed. D
7. Sales are made on credit. N
8. Interest on long-term debt is paid. D
9. Payments for previous sales are collected. I
10. The accounts payable balance is reduced. D
11. A dividend is paid. D
12. Production supplies are purchased and paid with a short-term note. N
13. Utility bills are paid. D
14. Cash is paid for raw materials purchased for inventory. D
15.
Marketable
securities are
sold. I
 Size of Accounts Receivable Essence of Skunk Fragrances, Ltd., sells 5,600 units of its perfume collection each year
on credit with terms of 1/10, net 40. The discount is taken by 60 percent of the customers. What is the total amoun
In reaction to sales by its main competitor, Sewage Spray, Essence of Skunk is considering a change in its credit pol
its market share. How will this change in policy affect accounts receivable?

UNITS 5600 TOTAL CREDIT SALES

PRICE PER UNIT 425 CUSTOMERS WITHOUT DISCONYT
SALES ON CREDIT 0.10
NET 40 AVARAGE COLLECTION PERIOD
DISCOUNT 60%
RECEVAIBLE TURNOVER

AVERAGE RECEIVABLE

If the firm increases the cash discount, more people will pay sooner, thus lowering the average collection period. If
which will lead to a decrease in the average receivables
me collection each year at a price per unit of $425. All sales are
What is the total amount of the company’s accounts receivable?
change in its credit policy to terms of 2/10, net 30 to preserve
ct accounts receivable?

2380000
40.00%

22

16.5909091

143452.055

age collection period. If the ACP declines, the receivables turnover increases,
average receivables