2018 2017 Cash and equivalents Accounts receivable Inventory Total current assets R149 R83 295 265 275 285 R719 R633 Total fixed assets 3 909 3 856 Accounts payable Notes payable Total current liabilities 228 220 228 220 Long term debt 1 800 1 650 Total liabilities and shareholders equity Number of shares outstanding 3 909 3 856 100 100 (millions)
1)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
please see attached image
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)
see attached image 2
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)
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