Question: Using the information produced in the income
Using the information produced in the income statement in Problem 4, use EBITDA as a multiple to estimate the continuation value in 2010, assuming the current value remains unchanged (reproduce Table 19.15). Infer the EV/sales and the unlevered and levered P/E ratios implied by the continuation value you calculated.
Data from Problem 4:
Under the assumption that Ideko’s market share will increase by 0.5% per year (and the investment and financing will be adjusted as described in Problem 3), you project the following depreciation:
Using this information, project net income through 2010.
Table 19.15:
Transcribed Image Text:
Year 2005 2006 2007 2008 2009 2010 Fixed Assets and Capital Investment ($ 000) 5,000 5,000 5,000 (5,450) 5,000 (5,365) 5,000 20,000 (5,328) (6,795) New Investment 3 Depreciation (5,500) (5,405) Continuation Value: Multiples Approach (S 000) 1 EBITDA in 2010 2 EBITDA multiple 3 Continuation Enterprise Value 4 Debt 5 Continuation Equity Value 32,094 9.1x 292,052 (120,000) Common Multiples EVISales P/E (levered) PIE (unlevered) 1.8x 16.3x 18.4x 172,052
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> Forecast Ideko’s free cash flow (reproduce Table 19.10), assuming Ideko’s market share will increase by 0.5% per year; investment, financing, and depreciation will be adjusted accordingly; and the projected improvement
> Forecast Ideko’s free cash flow (reproduce Table 19.10), assuming Ideko’s market share will increase by 0.5% per year; investment, financing, and depreciation will be adjusted accordingly; and the projected improvement
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> Under the assumption that Ideko’s market share will increase by 0.5% per year (and the investment and financing will be adjusted as described in Problem 3), you project the following depreciation: Using this information, project net i
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> Using the APV method, estimate the value of Ideko and the NPV of the deal using the continuation value you calculated in Problem 13 and the unlevered cost of capital estimate in Section 19.4. Assume that the debt cost of capital is 6.8%; Ideko’s market s
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> Calculate Ideko’s unlevered cost of capital when Ideko’s unlevered beta is 1.1 rather than 1.2, and all other required estimates are the same as in the chapter.
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