Financial Forecasting and FCF Valuation PDF

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IrresistibleBromeliad7537

Uploaded by IrresistibleBromeliad7537

2017

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financial forecasting free cash flow valuation business finance

Summary

This document presents a problem on financial forecasting and free cash flow valuation. It includes financial statements (income statement and balance sheet) for Kaplan Ltd. as of March 31, 2017. The problem requires forecasting financial statements for the years 2018-2024, considering various factors such as cost structure, revenue growth, depreciation, and tax.

Full Transcript

**Problem on Financial Forecasting and Free Cash Flow Method of Valuation** Kaplan Ltd. has the following actual financial statements as on 31^st^ March 2017: **INCOME STATEMENT** Rs-million ----------------------- ------------ Revenues 5,000 Raw Materials 3,000...

**Problem on Financial Forecasting and Free Cash Flow Method of Valuation** Kaplan Ltd. has the following actual financial statements as on 31^st^ March 2017: **INCOME STATEMENT** Rs-million ----------------------- ------------ Revenues 5,000 Raw Materials 3,000 Employee cost 450 Overheads 600 Depreciation 100 COGS 4,150 Interest 50 EBT 800 Tax @ 30% 240 EAT 560 Dividend \- **BALANCE SHEET** Fixed assets **1,000** Current assets 750 **Total assets** **1,750** Equity share capital 135 Reserves & surplus 560 8% debenture 625 Current liability 430 **Total liabilities** **1,750** The debenture is repayable in 5 equal instalments from 2017-18. While forecasting the financial statements from 2018 to 2024 you can consider the following: 1. The cost structure can remain the same. 2. The revenue growth Y0Y(Year on Year) would be 5%, but in years 2020 and 2023, there would be 3% rise in the selling price. 3. The company follows SLM for depreciation calculation but due to increasing additional capacity, the depreciation will be Rs. 120 million in year 2020 and Rs.150 million in the year 2022. 4. The company would be in 30% tax bracket throughout. 5. After the forecast period, a stable growth rate of 3% is considered to be realistic. 6. Other relevant information are: risk-free return 6%, beta 1, market return 15%. Moratorium period /delayed period

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