27 Jun QUESTION ONE ist anud briefly discuss five factors to consider when valuing a corporate entity
QUESTION ONE ist anud briefly discuss five factors to consider when valuing a corporate entity (5 marks) (b) The following data is in respect of a company. You are required to use the data in determining the value of operations of the company. The data is for the most recent period and ive year projects (figure in million Kenya shillings) PROJECTED Year o l Year 1 Year 2 Year 3 | Year 4 | Year 5 20 22242 26.62 2928 32.21 22.2 2.42 2.66 2.933.22 5 2 2.2 2.422.66 2.93 3.22 10 1112.1 13.31 14.64 16.11 . Turnover Fixed capital investment444 4.84 Working capital investment Non-cash charges Earnings before interest andt tax (EBIT 532 5.86 6.445 Additional information (D) After year five, turnover, working capital investment, fixed capital investment, EBIT and non-cash charges are expected to grow at annual rate of five-per cent each year into the foreseeable future. Weighted average cost of capital has be 12% for the first five years and 8 percent in the stable growth period. Tax-rate applicable is 30 per cent. been estimated to Required ) Compute free cash flow to the company for yéars 0, 1, 2, 3, 4 and 5. (6 marks) l) Compute the growth rate for the listed varlables for years 1,2, 3, 4 and 5. (ii) (iv) Compute the value of operations of the company Compute the terminal value. (3 marks) (6 marks) (5 marks)
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