Unit 11
Actual Year 1 Actual Year 2 Forecast Year 3
Sale 40,000 45,000 50,000
COGS 19,000 21,000 23,500
Gross profit 21,000 24,000 26,500
Gross profit (%) 52.5% 53.3% 53.0%
Trade debtors 5623 4452 6781
Inventory 2,256 2,357 2,794
Trade creditors 1,567 1,750 1,984
Net working capital 6,312 5,059 7,591
Debtor days 41 41
Inventory days 40 40
Creditor days 29 29
Purchase
Unit 12
Item Market value Weight % (1) Pre-tax cost %
Bank borrowings 15000 5.75% 7%
Sharehoders equity 245880 94.25% 7.80%
Total 260880 100.00%
Tax outflow arising from the salvage value in Year 3
Original cost 150,000
less Accumulated tax depreciation 150,000
Tax written-down book value 0
Sale price 15,000
Less Tax written-down book value 0
Depreciation recovered 15,000
Tax to pay on sale (at 30%) 4,500
Case 1: Book value = 0
Tax inflow arising from the salvage value in Year 4
Original cost 2,100,000
less Accumulated tax depreciation 1,260,000
Tax written-down book value 840,000
Sale price 320,000
Less Tax written-down book value 840,000
Depreciation recovered -520,000
Tax to benefit on sale (at 30%) -156,000
Case 2: Book value > sale price
Tax outflow arising from the salvage value in Year 4
Original cost 1,000,000
less Accumulated tax depreciation 625,000
Tax written-down book value 375,000
Sale price 500,000
Less Tax written-down book value 375,000
Depreciation recovered 125,000
Tax to benefit on sale (at 30%) 37,500
Case 3: Book value < sale price
Case 4: Book value = sale value ; no tax impact
Unit 13
Total $ Forecast 2016 Forecast 2017
Sales 46 56
Operating expense 24 31
EBITDA 22 25
Less income tax 6.6 7.5
Less IFCI 0.6 1
Less IWCI 0.9 1.5
FCF in Forecast period 13.9 15
Plus terminal value
Total FCF 13.9 15
Discount factor 10% 0.91 0.83
Enterprise value 232.17 12.64 12.40
Less Debt 82.1
Equity value 150.07
Calculate Equity value
using P/E ratio
Similar sized company
Profit after tax 19,500,000
Multiple ( average) 7.7
Equity value 150,150,000
Share price 2.002
using EV/ EBITDA
Similar sized company
EBITDA 40,000,000
Multiple ( average) 4.68
Enterprise value 187,200,000
Less Debt 50,000,000
Equity value 137,200,000
Share price 1.82933333333333
Unit 14
Year 0 Year 1 Year 2
Investment cost not incurred 600,000
Lease payment - 165,000 - 165,000 - 165,000
Tax benefit from lease payment 49,500 49,500
Tax benefit forgone (depreciation) - 45,000 - 45,000
Residual value
Net benefits 435,000 - 160,500 - 160,500
Discount factor 4% 1 0.9615384615 0.924556213018
Present value 435,000 - 154,327 - 148,391
NPV 2,933
Decision Lease
Calculated actual working capital
55,000
24,675
30,325
55.1%
13,630.19
4,403.27
2,496.12
15,537
60
50
29
26,721.27
After-tax cost % (2) Weighted average % (1) x (2)
4.90% 0.28174%
7.80% 7.35152%
7.63326%
Depreciation tax shield format
Year 0 Year 1 Year 2 Year 3
Initial cost -150000
Disposal ( old item) 10000
Extra sale 66000 66000 66000
Training cost -5000
Service cost -2000
Tax effect at 30% 1500 -19200 -19800 -19800
Depreciation tax shield 15000 15000 15000
Salvage value ( new oven) 15000
tax on disposal -4,500
Net cash flow -143500 59800 61200 71700
Discount factor 10% 1 0.909091 0.826446 0.751315
Adjusted cash flow -143500 54363.64 50578.51 53869.27
NPV 15311.419985
Forecast 2018
62
33
29
8.7
0.6
0.9
18.8
256.9
275.7
0.75
207.14
Year 3
49,500
- 45,000
- 150,000
- 145,500
0.888996358670915
- 129,349
Alternative presentation of depreciation - Gross format
Year 0 Year 1 Year 2 Year 3
Initial cost -150000
Disposal (old item) 10000
Extra sale 66000 66000 66000
less Training cost -5000
less Service cost -2000
less Depreciation -50000 -50000 -50000
Operating income before tax 14000 16000 16000
Tax effect at 30% 1500 -4200 -4800 -4800
Operating income after tax 9800 11200 11200
plus depreciation 50000 50000 50000
Salvage value ( new oven) 15000
tax on disposal -4,500
Net cash flow -143500 59800 61200 71700
Discount factor 10% 1 0.909091 0.826446 0.751315
Adjusted cash flow -143500 54363.64 50578.51 53869.27
NPV 15311.42
