a) Maggi believes that growth in the future will be higher than 2.25%, they believe that it is more likely to be 4.5%. What is the value of Bolli in 2022 if this growth is used as a basis. the value calculation? b) Explain the difference in values from questions b) and c)? c) Maggi then believes that an investment rate of 20% should be used for Bolli, and one growth of 3%, what will be the value of Bolli in 2022 based on this investment rate and the growth?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The consulting company Maggi has been hired to value the company Bolli AS. Bolli expects one operating profit of NOK 400 million in 2023. The company is expected to grow by 2.25% in year, and achieves a 9% return on invested capital. Bolli is 100% equity financed and the cost of equity is 10%.

 

a) Maggi believes that growth in the future will be higher than 2.25%, they believe that it is more likely to be 4.5%.

What is the value of Bolli in 2022 if this growth is used as a basis. the value calculation?

b) Explain the difference in values from questions b) and c)?

c) Maggi then believes that an investment rate of 20% should be used for Bolli, and one growth of 3%, what will be the value of Bolli in 2022 based on this investment rate and the growth?

 

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