Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Balance sheet
Cash 400 400
Accounts receivable 680 700
Inventories 570 600
Net property, plant and equipment 800 870
Intangibles 500 530
Notes:
1 The required rate of return is 19% per annum. Assume the required rate of
return also applies to free cash flow.
2 The current risk-free interest rate is 4% per annum. The risk premium is 3%.
3 Other information
JSE QBC Goods
P/E ratio 18,00 ?
Expected dividend growth rate 0,06 ?
Dividend yield 0,02 ?
Required:
1 List the three components of DuPont formula.
2 Calculate ROE for 2010 using the three components of the DuPont formula
3 Sustainable growth rate.
4 P/E ratio.
5 Weighted average cost of capital (WACC) based on book values.
6 Free cash flow to equity (FCFE)
7 Operating free cash flow (OFCF)(also called FCFF)
8 Expected intrinsic value of the company’s share.
9 Growth duration
10 Price/Book value (P/BV)
11 Price/Cash flow (P/CF)
12 Price/Sales (P/S)
3
Answer:
Or
Or
Or
Or
g = ROE x RR
= 23,21 x (1 – (0,60 / 1,96))
= 16,10%
4 P/E:
5 WACC:
WACC= W Ek + W Di
= [(2 200 / 2 500) x 0,19] + [(300 / 2 500) x (8,33% x (1 – 0,4))]
= 16,72 + 0,60
= 17,32%
4
FCFE =
Net Income 510,00
+ Depreciation 210,00
+ Amortisation 10,00
= Cash flow from operations 730,00
- Capital Expenditure (210 + 70) -280,00
- Working capital change (700 + 600 - 600) – (680 + 570 – 550)* 0,00
= Free cash flow to equity (FCFE) 450,00
* Excluding cash
How would we determine the present value of this (FCFE) cash flow?:
FCFE / (1 + k)
FCFE / (k – g FCFE)
7 Operating free cash flow (OFCF) (also called FCFF – Free Cash Flow to the
Firm)
How would we determine the present value of this (FCFF) cash flow?:
FCFF / (1 + WACC)
8 E(V) = D1 / k – g
= 0,60 / (0,19 – 0,1610)
= 20,69.
5
9 Growth duration
T = ln (0,59) / ln (1,1019)
= -0,53 / 0,097
= -5,4979 years
Because it is negative, the company has to grow for 5,5 years before it will
reach the level of the industry.
Or
Or