Consider the following data for ABC enterprises (all numbers in €):
- Today is January 1, 2013
- Income statement for 2012 shows:
- Revenues for 500,000
- Cost of Goods sold: 350,000
- General & Administrative Costs 25,000
- Applicable tax rate = 35%
- Investment in working capital for 2013 is expected to amount to 20,000 and capex will be 40,000.
- Depreciation that same year has been estimated at 15,000.
- Evolution of the above magnitudes is expected to be the following:
- Revenues is expected to grow at a rate of 5% until 2017
- Cost of goods sold: 70% of revenues
- G&A costs: 5% of revenues
- Investment in working capital is expected to grow at a rate of 5% until 2017
- Both CAPEX and depreciation are expected to follow the same growth rates which are: 4% until 2015 and 2% the two years after that.
With respect to the cost of capital, available data is the following:
- The firm's balance sheet shows 200,000 in financial debt which bears an interest rate of 5% and 500,000 in equity.
- Industry's average unlevered beta = 1.13
- Market risk premium = 7%
- Government bond with 20 years´ maturity stands at 3%
Forecast cash flows for 2013 - 2017, estimate the Residual Value and perform the corresponding firm valuation.