Cash flows of Nicholson File are projected for five years 1972-1976

Sales growth will be 2% in 1972, 4% in 1973 and 6% in subsequent years

EBIT will be 12% of sales. Tax rate = 40%. Depreciation = Capex
Working Capital will continue at the current level of 60% of sales. (No inventory reduction)
WACC is 10%
1 2 3 4 5
1971 1972 1973 1974 1975 1976
Sales 55.30 56.41 58.66 62.18 65.91 69.87 74.06
EBIT 6.77 7.04 7.46 7.91 8.38 8.89
EBIT(1-t) 4.06 4.22 4.48 4.75 5.03 5.33
Unlevered Net income 4.06 4.22 4.48 4.75 5.03 5.33
WC 33.18 33.84 35.20 37.31 39.55 41.92 44.44
Less: Increase in WC 0.66 1.35 2.11 2.24 2.37 2.52
Cash flow 3.40 2.87 2.37 2.51 2.66 2.74
Terminal value 39.10
PV 3.09 2.37 1.78 1.71 1.65
PV(72-76) 10.60

Terminal value in 1976 39.10

PV of this terminal value in 1971 24.281

Cash flow 3.40 2.87 2.37 2.51 2.66

Terminal value 39.10
FCF 3.40 2.87 2.37 2.51 41.76

Enterprise value 34.88

Less debt -12
Equity value 22.88
No of shares outstanding 0.584 million
Per share value 39.18
40% tax rate

10%

2.82 …... 3% growth rate

34.88