8. A software company which recently shifted its market focus from about 90% of export to a mix of 80% export and 20% domestic business strategy. One of the reasons for the shift in the business mix is because of better adoption of technology by domestic companies and the second being higher volatility in the currency. Following are the old and new financials. In billion INR Sales EBIT NOPAT Depreciation CAPEX Working capital Old 800 240 192 10 40 120 New 900 250 200 15 50 162 Compute the free cash flow under both situations. In both situations the company had a WACC of 10%. Beyond this year the free cash flow is expected grow at 5% till infinity. Compute the original and revised value of the company. According to you (based on the above numbers and your valuation) what would have been the reason for increase/decrease in the value because of the new business strategy.
8. A software company which recently shifted its market focus from about 90% of export to a mix of 80% export and 20% domestic business strategy. One of the reasons for the shift in the business mix is because of better adoption of technology by domestic companies and the second being higher volatility in the currency. Following are the old and new financials. In billion INR Sales EBIT NOPAT Depreciation CAPEX Working capital Old 800 240 192 10 40 120 New 900 250 200 15 50 162 Compute the free cash flow under both situations. In both situations the company had a WACC of 10%. Beyond this year the free cash flow is expected grow at 5% till infinity. Compute the original and revised value of the company. According to you (based on the above numbers and your valuation) what would have been the reason for increase/decrease in the value because of the new business strategy.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:8. A software company which recently shifted its market focus from about 90% of export to a mix of 80% export and 20%
domestic business strategy. One of the reasons for the shift in the business mix is because of better adoption of
technology by domestic companies and the second being higher volatility in the currency.
Following are the old and new financials. <o:p></o:p>
In billion INR
<o:p></o:p>
Sales
EBIT
NOPAT
Depreciation
CAPEX
Working capital
Old
800
240
192
10
40
120
New
900
250
200
15
50
162
Compute the free cash flow under both situations. In both situations the company had a WACC of 10%. Beyond this year,
the free cash flow is expected grow at 5% till infinity. Compute the original and revised value of the company. According
to you (based on the above numbers and your valuation) what would have been the reason for increase/decrease in the
value because of the new business strategy.
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