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    Ameer hamza
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    The income statement shows sales of $1,000 with costs of goods sold of 50% and other expenses resulting in a profit before tax of $374. The tax rate is 40% resulting in a profit after tax of $225. Dividends of $90 were paid out at a 40% payout ratio, leaving retained earnings of $135. The balance sheet shows current assets of $150, fixed assets of $770, and total assets of $1,000. Current liabilities are $80, debt is $320, equity is $450, and retained earnings are $150, for total liabilities and equity of $1,000.

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    Lecture about model in which we calculate value of firm.

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    Lecture-12 class work-Upload

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    The income statement shows sales of $1,000 with costs of goods sold of 50% and other expenses resulting in a profit before tax of $374. The tax rate is 40% resulting in a profit after tax of $225. Dividends of $90 were paid out at a 40% payout ratio, leaving retained earnings of $135. The balance sheet shows current assets of $150, fixed assets of $770, and total assets of $1,000. Current liabilities are $80, debt is $320, equity is $450, and retained earnings are $150, for total liabilities and equity of $1,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Download as xlsx, pdf, or txt
    8 views14 pages

    Lecture-12 Class Work-Upload

    Uploaded by

    Ameer hamza
    The income statement shows sales of $1,000 with costs of goods sold of 50% and other expenses resulting in a profit before tax of $374. The tax rate is 40% resulting in a profit after tax of $225. Dividends of $90 were paid out at a 40% payout ratio, leaving retained earnings of $135. The balance sheet shows current assets of $150, fixed assets of $770, and total assets of $1,000. Current liabilities are $80, debt is $320, equity is $450, and retained earnings are $150, for total liabilities and equity of $1,000.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 14

    Income statement

    Sales 1,000
    Costs of goods sold -500 CGS/Sales -50%
    Interest payments on debt -32
    Interest earned on cash and marketable se 6
    Depreciation -100
    Profit before tax 374 374
    Taxes -150 -40% Tax Rate
    Profit after tax 225 224
    Dividends -90 -40% Div Payout Ratio
    Retained earnings 135 135
    Balance sheet
    Cash and marketable securities 80
    Current assets 150 CA/Sales 15%
    Fixed assets
    At cost 1,070
    Depreciation -300
    Net fixed assets 770 NFA/Sales 77%
    Total assets 1,000

    Current liabilities 80 CL/Sales 8%


    Debt 320
    Stock 450
    Accumulated retained earnings 150
    Total liabilities and equity 1,000
    FIRST FINANCIAL MODEL
    Year 0
    Sales growth 10% Income Statement
    Current assets/Sales 15% Sales 1000
    Current liabilities/Sales 8% Costs of goods sold -500
    Net fixed assets/Sales 77% Interest payments on debt -32
    Costs of goods sold/Sales 50% Interest earned on cash and m. securities 6
    Depreciation rate 10% Depreciation -100
    Interest rate on debt 10% Profit before tax 374
    Interest paid on cash and marketable securities 8% Taxes -150
    Tax rate 40% Profit after tax 225
    Dividend payout ratio 40% Dividends -90
    Retained earnings 135

    Balance sheet
    Cash and marketable securities 80
    Current assets 150
    Fixed assets
    At cost 1070
    Depreciation -300
    Net fixed assets 770
    Total assets 1000

    Current liabilities 80
    Debt 320
    Stock 450
    Accumulated retained earnings 150
    Total liabilities and equity 1000
    NCIAL MODEL
    1 2 3 4 5 6 7 8 9 10

    1100 1210 1331 1464 1611 1772 1949 2144 2358 2594
    -550 -605 -666 -732 -805 -886 -974 -1072 -1179 -1297
    -32 -32 -32 -32 -32 -32 -32 -32 -32 -32
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522

    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    165 182 200 220 242 266 292 322 354 389

    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    847 932 1025 1127 1240 1364 1501 1651 1816 1997
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522

    88 97 106 117 129 142 156 171 189 207


    320 320 320 320 320 320 320 320 320 320
    450 450 450 450 450 450 450 450 450 450
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522
    FREE CASH FLOW CALCULATION
    Year 0 1 2 3 4 5
    Profit After Tax Err:522 Err:522 Err:522 Err:522 Err:522
    Add: Depreciation Err:522 Err:522 Err:522 Err:522 Err:522
    Subtract: Increase in Current assets -15 -17 -18 -20 -22
    Add: Increase in Current Liabilities 8 9 10 11 12
    Subtract: Increase in fixed assets at cost Err:522 Err:522 Err:522 Err:522 Err:522
    Add: After-tax interest on debt 19 19 19 19 19
    Subtract: After-tax interest on Cash and Marketable securities Err:522 Err:522 Err:522 Err:522 Err:522
    FREE CASH FLOW Err:522 Err:522 Err:522 Err:522 Err:522
    Err:522 Err:522 Err:522 Err:522
    Valuing the Firm
    Weighted average cost of capital 20%
    Long term free cash flow growth rate 5%

    Year 0 1 2 3 4
    Free cash flow Err:522 Err:522 Err:522 Err:522
    Terminal Value
    Total Err:522 Err:522 Err:522 Err:522
    Value of the firm Err:522
    Add in year 0 Cash & Mkt Securities 80
    Assets value in year 0 Err:522
    Subtract out value of firm's debt today -320
    Equity Value Err:522

    Year Cashflow DCF PV


    1 176 0.833333 147
    2 188 0.694444 131
    3 201 0.578704 116
    4 214 0.482253 103
    5 1826 0.401878 734

    NPV (For yearly discounting) 1231


    5
    Err:522
    Err:522
    Err:522

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