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COST OF CAPITAL
Based on the Offer Price of up to ₱ 5.05 per Offer Share, the Company estimates that the total
proceeds, total expenses, and the net proceeds from the Offer will be:
Estimated Amounts
(₱ millions)
Total proceeds from the Offer ₱ 7,039.2
Less: Expenses
Underwriting and selling fees (including fees to be paid to the
189.2
PSE Trading Participants, incl. GRT)
Documentary Stamps Tax 7
SEC registration, filing and research fees 3.3
PSE Processing Fees 20
IPO Tax 70.4
Estimated professional fees (including legal, audit, and
7.5
financial advisory fees)
Others 2.0
Total estimated expenses from the Offer 299.4
Estimated net proceeds from the Offer ₱ 6,739.8
Dividend Amount
Year
per Share
2018 *0.0845
2017 0.08
2016 0.00
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
{∑ [(𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 ) − 1 𝑥 100]}
𝑔=
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠
5.625
𝑔=
1
𝑔 = 5.625
Current value of common stock is ₱11.58.
Risk free rate of return is 3.356
The beta coefficient of the firm is 0.36
Market return is 9.6
NOTES:
The divided on 2018 is an assumed figure based on the company dividend policy that maintains
an annual cash and/or dividend pay-out of up to 25% of its net profit after tax from the preceding
year.
The corporation was only incorporated last 2015. No available financial records were found
prior to that year. Due to this limitation, only available dividend data since the December 2015
incorporation were used in computing the growth rate.
The market return is based on the average market return of 9.6% per year.
https://www.marketwatch.com/investing/stock/wlcon?countrycode=ph
𝐷1
𝑟𝑠 = + 𝑔
𝑃0
0.0845
𝑟𝑠 = + .05625
11.58
𝑟𝑠 = 6.35%
WHERE: 𝒓𝒔 = required return on common stock | 𝑫𝟏 = per share dividend expected at end of year 1 |
𝑷𝟎 = value of common stock | 𝒈 = constant rate of growth
𝒓𝒔 = 𝟓. 𝟔𝟎%
0.0845
𝑟𝑟 = + .05625
11.58
𝒓𝒓 = 𝟔. 𝟑𝟓%
WHERE: 𝒓𝒓 = required return on common stock | 𝑫𝟏 = per share dividend expected at end of year
1 | 𝑷𝟎 = value of common stock | 𝒈 = constant rate of growth
𝐷1
𝑟𝑛 = + 𝑔
𝑁𝑛
0.0845
𝑟𝑛 = + 0.05625
4.8352
𝒓𝒏 = 𝟕. 𝟑𝟕%
WHERE: 𝒓𝒏 = required return on issuance of new shares | 𝑫𝟏 = per share dividend expected at end
of year 1 | 𝑵𝒏 = net proceeds per share | 𝒈 = constant rate of growth
CHANGE ₱ ₱ ₱ ₱ ₱ ₱ ₱
IN - 3,341,490, 3,698,836,4 5,326,324,5 7,669,907,3 11,044,666, 15,904,319,
CURREN 765.00 96.96 55.62 60.10 598.54 901.90
T
ASSETS
The formula used to get the projections is to multiply the 44% revenue growth rate to the
previous year’s amount and then add it to the previous year’s amount. As depicted in the table above,
the actual results for 2017 is near its projected change in working capital which verifies the computation
of the projections.
6.2 CURRENT LIABILITIES PROJECTION
2017
Years 2016 Actual Projected 2018 2019 2020 2021
Current
Liabilities
Short-term ₱ ₱ ₱ ₱ ₱ ₱ ₱
debt 445,000, - - - - - -
000
Current 278,461, 155,000,0 285,769,23 244,615,38 ₱ ₱ 0
portion of 539 00 0 5 80,000,000 38,974,359
long-term
debt
Trade and 3,619,67 3,491,311
other 9,500 ,355 5,212,338, 7,505,767, 10,808,305 15,563,959 22,412,101,
payables 480 411 ,072 ,304 397.56
Income tax 154,094, 78,888,67
payable 765 5 221,896,46 319,530,90 460,124,50 662,579,28 954,114,168
2 4.70 3 3.99 .95
Total ₱ ₱ ₱ ₱ ₱ ₱ ₱
Current 4,497,23 3,725,200 5,720,004, 8,069,913, 11,348,429 16,265,512 23,366,215,
Liabilities 5,804 ,030 172 701 ,575 ,947 567
CHANGE ₱ -₱ ₱ ₱ ₱ ₱ ₱
IN - 772,035,7 1,222,768, 2,349,909, 3,278,515, 4,917,083, 7,100,702,6
CURREN 74.00 367.91 528.65 874.38 371.92 19.66
T
LIABILIT
IES
*The current portion for 2017 is adjusted to match it with the actual presentation in the Balance Sheet.
• For the “trade and other payables” and “income tax payable” accounts, the 44%
revenue growth is used.
The following table shows the total working capital projections, changes in working capital and
the percentage change for each year:
2017
Years 2016 Actual Projected 2018 2019 2020 2021
WORKIN ₱ ₱ ₱ ₱ ₱ ₱ ₱
G 3,909,21 8,022,737, 6,385,278, 9,361,693, 13,753,085 19,880,668 28,684,285
CAPITAL 0,780 319 909 936 ,422 ,648 ,931
CHANGE ₱ ₱ ₱ ₱ ₱ ₱ ₱
IN - 4,113,526, 2,476,068, 2,976,415, 4,391,391, 6,127,583, 8,803,617,
WORKIN 539.00 129.05 026.97 485.71 226.62 282.24
G
CAPITAL
The current ratio and quick ratio as key performance indicators are projected to be:
2017
2016 Actual Projected 2018 2019 2020 2021
CURRENT RATIO
1.87 3.15 2.12 2.16 2.21 2.22 2.23
QUICK RATIO
0.24 1.12 0.27 0.27 0.28 0.28 0.28
The increase in the current ratio and quick ratio is a good indication that the company has the
ability to cover its short-term liabilities.
The table below shows the change in net working capital that is used in the computation of the
relevant cash flows of the company:
Change In Current Assets ₱ 43,644,054,913.11
Less: Change In Current Liabilities 18,868,979,762.52
Net Change In Working Capital ₱ 24,775,075,150.60
CHAPTER SEVEN
DEFENSE FOR THE INVESTMENT TO THE PROJECT