You are an investment analyst at FI Investments tasked to value FBC firm a Southern Agricultural Conglomerate. The following financial information was recently released for FBC. The company’s 2018 and 2017 annual financial reports are contained in tables 1 and 2 below, along with important additional information: Table 1: FBC statement of financial position (R millions)2018 2017Cash and equivalents R149 R83Accounts receivable 295 265Inventory 275 285Total current assets R719 R633Total fixed assets 3 909 3 856Accounts payable 228 220Notes payable 0 0Total current liabilities 228 220Long term debt 1 800 1 650Total liabilities and shareholders equity 3 909 3 856Number of shares outstanding (millions) 100 100 Additional information:• Depreciation (2018): R483.• The firm spent R250m in profitable projects during the course of 2018• WACC : 15%• Cost of equity of the firm: 10%• Tax rate : 40%Table 2: FBC statement of comprehensive income(R millions except for share data)2018 2017Total revenues R3 175 R3 075EBIT 495 448Interest expense 104 101Net Income 235 208Dividends per share R0.80 R0.80 Use the information given, to answer the following:a) Calculate the Free Cash Flow to the Firm (FCFF) for the year 2018. [7 marks]b) You are told that the Free Cash Flow to Equity (FCFE) of the firm will continue to grow at a rate of 5% for the next 3 years, after which it will stabilize to a rate of 3%. Calculate the intrinsic value of each of FBC’ shares. 9 (Use 2.d.p in your calculations & final answer for this question) Requires: Net working capital (2017) Net working capital (2018) FCFF0 FCFE0 FCFE1 FCFE2 FCFE3 FCFE(t+1) Pn Value of equity Value of share
You are an investment analyst at FI Investments tasked to value FBC firm a Southern Agricultural Conglomerate. The following financial information was recently released for FBC. The company’s 2018 and 2017 annual financial reports are contained in tables 1 and 2 below, along with important additional information:
Table 1: FBC
2018 2017
Cash and equivalents R149 R83
Inventory 275 285
Total current assets R719 R633
Total fixed assets 3 909 3 856
Accounts payable 228 220
Notes payable 0 0
Total current liabilities 228 220
Long term debt 1 800 1 650
Total liabilities and shareholders equity 3 909 3 856
Number of shares outstanding (millions) 100 100
Additional information:
•
• The firm spent R250m in profitable projects during the course of 2018
• WACC : 15%
•
• Tax rate : 40%
Table 2: FBC statement of comprehensive income
(R millions except for share data)
2018 2017
Total revenues R3 175 R3 075
EBIT 495 448
Interest expense 104 101
Net Income 235 208
Dividends per share R0.80 R0.80
Use the information given, to answer the following:
a) Calculate the
b) You are told that the Free Cash Flow to Equity (FCFE) of the firm will continue to grow at a rate of 5% for the next 3 years, after which it will stabilize to a rate of 3%. Calculate the intrinsic value of each of FBC’ shares. 9 (Use 2.d.p in your calculations & final answer for this question)
Requires:
Net
Net working capital (2018)
FCFF0
FCFE0
FCFE1
FCFE2
FCFE3
FCFE(t+1)
Pn
Value of equity
Value of share
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