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Inventory =

Inventory =
Inventory =

sales
inventory turnover ratio

$10,000,000
2

$5,000,000

Cash freed up = $ 5,000,000 - $ 2,000

Inventory =
Inventory =
Inventory =

sales
inventory turnover ratio

$10,000,000
5

$2,000,000

= $ 5,000,000 - $ 2,000,000 = $ 3,000,000

AR= Credit sales per day x length of c

AR = $3,500 x 17 = $

sales per day x length of collection period


AR = $3,500 x 17 = $59,500

Nominal cost of trade credit


Nominal cost of trade credit

3
97

365
30-15

= 0.030928 x 24.333333333

Nominal cost of trade credit =

75.26%

Effective cost of trade credit


= [ (1 + 1/99)^ (365/45) ] - 1
Effective cost of trade credit = 8.49%

25.08591

NOPAT=EBIT*(1-tax rate)
NOPAT = 108.6 * (1-40%)
NOPAT = $ 65.16
Operating capital= Net operating working capital (NOWC) - Net
NOWC=
$ 5.60 + $ 56.20 + $ 112.40 = $ 174.20
Net Plant and Equipment=
$ 11.20 + $ 28.10 =
Operating Capital= $174.2-$39.3
Operating Capital= $134.9
Total Operating Capital= Net operating capital+ Fixed Assets
Total Operating Capital=
$ 134.90 + $ 397.50 =
Investment in Capital=Change in operating Capital
= $ 532.40 - $ 502.20 =
Free Cash Flow=NOPAT - Investment in Capital
= $ 65.16 - $ 30.20
Free Cash Flow = $34.96

Plant and Equipment


$

39.30

$ 532.40
$

30.20

Horizon value (2011) = FCF in 2011/ (WACC-Growth Rate)


34.96
Horizon value
Horizon value
Horizon value

FCF
WACC - g

$37.06
11 % - 6%
= $741.15
=

Value of operations (20


Value of operations (20
Value of operations
Value of operations (20
Value of operations (20

alue of operations (2010)


= FCF
+ Horizon Value
alue of operations (2010)
= $ 34.96 +
$741.15
alue of operations (2010)= $776.11
alue of operations (2009)
= $ 741.15 $41.95
alue of operations (2009)
= $699.20

Total Value of the Company


=
Total Value of the Company
=
Total Value of the Company =

Value of operations
$699.20
$749.10

+ marketable securities
+
$49.90

Value of Equity
Value of Equity
Value of Equity
Price per share
Price per share
Price per share

= Value of the company


=
$749.10
=
$503.40

- debt
- $210.70

- preferred stock
$35

Value of Equity
number of shares
$503.40
=
10
=
$50.34
=

50.34