HUL, a leader in the development and manufacture of household products in India

,
reported EBIT of Rs. 1200 lakh in 2004, prior to depreciation of Rs. 350 lakh. The capital
expenditure in 2009 amounted to Rs. 420 lakh and working capital was 10% of the
revenues which were Rs. 13000 lakh. The firm has outstanding debt yielding a pre-tax
interest rate of 8%. The tax rate for the firm is 40% and the Treasury bill rate is
Solution:

Base year information
EBIT
Capital Expenditure
Depreciation
Revenues
WC as a % of revenue
Tax rate
Expected growth rate
Cost of Debt
Cost of Equity
Debt ratio

Revenues
WC
Changes in WC

2009
1200
420
350
13000
10%
40%
9.50%
8.0%
13.6%
50%

lakh
lakh
lakh
lakh

Estimation of Change in Working Capital
2009
2010
2011
2012
2013
13000
14235
15587.33 17068.12 18689.59
1300
1423.5
1558.733 1706.812 1868.959
123.5
135.2325 148.0796 162.1471
2009

EBIT
- Tax rate
- Capex - Depreciation
- Change in WC
FCFF
PV of FCFF @
9.20%
Cost of Capital
formula

9.2%

Value pf firm

2708.29

2010
1314.00
-525.60
-76.65
-123.50
588.25

2011
1438.83
-575.53
-83.93
-135.23
644.13

2012
1575.52
-630.21
-91.91
-148.08
705.33

2013
1725.19
-690.08
-100.64
-162.15
772.33

538.69

540.17

541.65

543.14

51 177.20 -177.1 2046.55 845.doubt need to fil info 2014 20465.09 -755.5511 2014 1889.63 -110.63 .70 544.

(Capex .15 772.91 -148.2% Terminal Value ######### Value of firm ######### 538.50 123.Base year information EBIT Capital Expenditure Depreciation Revenues WC as a % of revenue Tax rate Expected growth rate Cost of Debt Cost of Equity Debt ratio 2011 1200 420 350 13000 10% 40% 9.21 -91.17 541.Tax rate .Depreciation) .08 -100.17 541.00 -525.23 148.00 1423.69 540.08 162.53 -83.12 18689.15 2011 2012 1314.50% 2013 2014 2015 15587.25 2013 1438.50 588.14 .52 -630.83 -575.14 Cost of Capital formula 9.6% 50% lakh lakh lakh lakh Estimation of Change in Working Capital Revenues WC Changes in WC EBIT .19 -690.33 538.96 135.50% 8% 13.55% 2011 13000.33 2015 1725.08 705.13 2014 1575.00 1300.50 9.81 1868.60 -76.73 1706.93 -135.65 -123.65 543.00 2012 14235.64 -162.Change in WC FCFF PV of FCFF @ 9.23 644.33 17068.20% 8.69 540.65 543.59 1558.

45 -255.89 233.7% 7% 10% 25% 11% 9% 8% 75% 7% 2016 2017 2018 2019 2020 2021 20465.16 -212.88 32216.42 900.09 -755.63 -110.70 2017 (Terminal Value) 2940.74 -30591.29 24538.93 2942.36 544.46 2018 2162.08 32184.51 2022 35760.64 2019 2314.42 2020 2476.48 -144.55% 544.56 -279.74 2016 1889.40 -171.89 958.82 -154.21 -925.26 1086.08 832.21 -990.11 255.56 -32184.26 279.32 -808.53 -117.76 8.51 2240.20 -177.00 849.96 2046.82 2686.82 3576.70 177.91 -194.10 22409.55 194.11 1020.30 29421.19 3221.55% .42 212.68 -135.63 -1271038.71 2017 2021.63 (Terminal Year) Power ka thin 8.51 1155.13 -126.17 26869.02 2021 2649.13 866.00 -233.82 -865.93 2453.66 900.54 -1059.99 EBIT is taken over 5th year -1176.46 883.55 845.

doubt need to fil info EBIT is taken over 5th year Power ka thin .

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