Page 78 - DMGT409Basic Financial Management

Unit 4: Cost of Capital

Notes
Diluted earning per Annum 1.4 1.9 2.7 1.4 1.6 2.1 2.2
Shares
Average shares outstanding 294.0 293.6 297.0 296.0 287.5 279.8 273.3
(diluted)
Growth(%)
Revenue 35.9 42.0 4.0 8.1 2.5 5.5
Operating income 42.2 41.5 37.4 0.8 15.0 3.0
Net income 38.4 43.9 49.8 13.0 28.3 1.8
Margins (%)
Gross margin 39.6 40.1 36.5 37.4 39.9 39.0
Operating margin 15.1 15.0 9.0 9.8 10.9 10.7
Net margin 8.5 8.7 4.2 3.1 6.4 6.2
Effective tax rate (%) 38.5 38.6 38.8 39.5 37.0 36.0
Exhibit 2: Discounted - Cash - fl ow Analysis
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Assumption
Revenue growth (%) 7.0 6.5 6.5 6.5 6.0 6.0 6.0 6.0 6.0 6.0
COGS/Sales (%) 60.0 60.0 59.5 59.5 59.0 59.0 58.5 58.5 58.0 58.0
S & A/Sales (%) 28.0 27.5 27.0 26.5 26.0 25.5 25.0 25.0 25.0 25.0
Tax rate (%) 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0
Current Assets/ 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0
sales (%)
Current liabilities/ 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5
sales (%)
Yearly deprecia-
tions Equals capex.
Cost of Capital (%) 12.0
Terminal growth 3.0
rate (%)
Discounted cash fl ow
Opeating income 1,218.4 1,351.6 1554.6 1717.0 1950.0 2135.9 2410.2 2554.8 2790.1 2957.5
Taxes 463.0 513.6 590.8 652.5 741.0 811.7 915.9 970.8 1060.2 1123.9
NOPAT 755.4 838.0 963.9 1064.5 1209.0 1324.3 1494.3 1584.0 1729.9 1833.7
Capex.net of derecia- --- --- --- --- --- --- --- --- --- ---
tion
Change in NWC 8.8 -174.9 186.3 198.4 195.0 206.7 219.1 232.3 246.2 261.0
Free cash fl ow 764.1 663.1 776.6 866.2 1014.0 1176.6 1275.2 1351.7 1483.7 1572.7
Terminal value 17998.7
Total fl ows 764.1 663.1 776.6 866.2 1014.0 1176.6 1275.2 1351.7 1483.7 19571.5
Present value of 682.3 528.6 553.5 550.5 575.4 566.2 576.8 545.9 535.0 6301.5
fl ows
Enterprise value 11415.7
Less : current out- 1296.6
standing dept.
Equity value 10119.1
Current shares 271.5
outstanding
Equity value per $37.27 Current share $42.09
share price

Contd...

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