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23. Based on the following data, what is the horizon value at the end of year...

23. Based on the following data, what is the horizon value at the end of year 5? Year 1 Revenue 700.00 Fixed costs 90.00 Variable costs 220.00 Additional investment in NWC 3.00 Additional investment in operating long-term assets 80.00 Depreciation 75.00 Tax rate 0.40 The free cash flow is expected to grow at 8% per year from year 1 to year 5 and 6% per year after year 5 to infinity. WACCcomp = 12%. Select one: a. $4,350.39 b. $4,322.04 c. $3,394.77 d. $4,377.90 e. $4,333.76

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solution calculation of FCF for vear 1: Revenue Less: variable cost Less fixed cost Less Depreciation Profit before tax Less: tax at 40% 700 220 90 75 315 126 189 75 264 rofit after tax Add Depreciation OCF Less : Additional working capital Less: capital expenditure FCF for year 1 80 181 horizon value at the end of year 5-FCF at the end of year 6/(WACC-growth rate 4,350.39 181 (1.0844) 1.06/(0.12-0.06 Hence option a is correct. ??! Sheet51 Sheet52Sheet53 Sheet54Sheets5 Sheet56Sheet57 Sheet58 Sheet59 Sheet60 ENG15040 UK 04/08/2018

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