TOVEL PLC

APV= Base case NPV + Financing side effects

APV (117.45)
Base case NPV
DR= Ke UG using CAPM
Ke(ug) 11.95%

Ungearing Using average data

Ba=1.4*(1/1+1(1-t))+.25*(1(1-t)/1+1(1-t))
Ba 0.9262

0 1 2 3 4 5
Operating cashflows 420 441 463 486 511
Tax depriciation (w1) (263) (197) (148) (111) (332)
Taxable income 158 244 315 375 178
Tax payment (47) (73) (95) (113)
Tax depriciation (w1) 263 197 148 110.7 332
Investment (2,300)
Realisale value 1250

NCF's (2,300) 420 394 390 392 1,648

D.R 12% w5

Base case NPV (176.83)

Financing side effects

PV OF Issue cost (w2) (79)

Present value of Tax shield (w3) 71
PV OF Subsidized loan (w4) 68
Value of financing side effects 59
Workings
Tax depriciation (w1)

Yr Capital allowance
1 262.5
2 196.9
3 147.7
4 110.7
5 332.2

Year 5 balance
cost 1050
Acc dep 717.7734375
NBV 332.2265625

W2
Net Gross Issue cost
Debt 800 800 Nil
Equity 1500 1,579 79
2300 2,379 79

W3 Tax shield Interest Tax shield Annuity PV

Yr2 - Yr6 6% Debt 800 48 14.4 3.569 51.3936
Normal loan 18 5.4 3.569 19.2726
Yr1 - Yr6 annuity 4.486 70.6662
Yr1 0.917
Yr2 - Yr6 3.569 DR 5%
Kd 9%
W4
Subsidized loan PV OF SUB LOAN
Interest saving 24 93.36
Tax effect 7.2 -25.6968
67.6632
W5
DR= Ke UG using CAPM
Ke(ug) 11.95%

Ungearing
Ba=1.4*(1/1+1(1-t))+.25*(1(1-t)/1+1(1-t))
Ba 0.9262
de effects

(53)

(53)