Case 16.2: Sunlight Paints Limited: Assumptions
Case 16.2: Sunlight Paints Limited: Assumptions
Case 16.2: Sunlight Paints Limited: Assumptions
Assumptions:
Tax rate 35% Year 2004 2005 2006 2007
Equity beta 1.05 Working Capital 67.00 70.81 78.72 98.40
D/E ratio (1:5) 0.20 Capex* 75.00 50.00 20.60 18.80
E/V ratio 83.33% * It is assumed that capex is incurred in the beginning of the current year and therefore, treated as at the end of the previous
D/V ratio 16.67% in year 14 is assumed equal to depreciation.
Cost of equity 18.00% 2004.00 2005.00 2006.00 2007.00
Cost of debt 8.10% Sales 202.30 224.91 281.14
Pre-tax WACC (OCC) 16.35% Cash expenses 161.27 173.70 204.63
Interest (A) 20.13 20.13 20.13
Risk-free rate 7.50% Depreciation (B) 135.92 105.20 77.72
Risk premium 10.00% Profit after tax( C ) 26.67 33.29 49.73
Unlevered beta 0.88 Change in NWC (D) -3.81 -7.91 -19.68
Capex (E) -75.00 -50.00 -20.60 -18.80
New debt 125.00 After-tax cash flows, F = B+C+D+E -75.00 108.78 109.98 88.97
Interest rate 8.10% Add: After-tax Interest (G) 13.08 13.08 13.08
Existing debt 100.00 Unlevered (or free) cash flow, H = F+G -75.00 121.86 123.06 102.05
Market interest rate (BTCOD) 8.10% SV
ATCOD 5.27% NCF 121.86 123.06 102.05
Value 774.20
PV of Interest tax shield 47.05 7.04 7.04 7.04
Total value 821.25
Less: Value of debt 225.00
Equity value 596.25
Value per share 23.85