How much is the price today of a bond with the following features:

Nominal amount 100, due date in 1 year, yield 3%

Nominal amount 100 97.09 price

Yield 3.0%
Maturity (year) 1

How much is the price today of a bond with the following features:
coupon payment Eur10 flat and paid once a year (at the end of any coming year), perpetual (no reimbursement of nomina

Coupon 10 500 price

Market yield 2.0%

How much is the price today of a bond with the following features:
coupon payment Eur10, growing 1% compounded any year, and paid once a year (at the end of any coming year), perpetu

Coupon 10 1,000.00 price

Market yield 2.0%
Growth rate (g) 1.0%

How much is the price today of a bond with the following features:
reimbursed at nominal value, due date in 3 years from now, coupon rate 2% (annual), market yield 4%?

Nominal value 100 year 1

Coupon rate (interest rate) 2.0% cash in 2
Market yield 4.0% NPV @ mrkt yield 1.92

How much is the price today of a bond with the following features:
reimbursed at nominal value, due date in 3 years from now, coupon rate 3% (annual), market yield 2%?

Nominal value 100 year 1

Coupon rate (interest rate) 3.0% cash in 3
Market yield 2.0% NPV @ mrkt yield 2.94

How much is the price today of a bond with the following features:
reimbursed at nominal value, due date in 3 years from now, coupon rate 4% (annual), market yield 4%?

Nominal value 100 year 1

Coupon rate (interest rate) 4.0% cash in 4
Market yield 4.0% NPV @ mrkt yield 3.85
reimbursement of nominal value), market yield 2%

any coming year), perpetual (no reimbursement of nominal value), market yield 2%

2 3
2 102
1.85 90.68 94.45
Σ (price)

2 3
3 103
2.88 97.06 102.88
Σ (price)

2 3
4 104
3.70 92.46 100.00
Σ (price)
How much is the price today of a share of a company having the following features:
Expected dividend in one year from now is Eur 10, expected to be flat forever, discount rate (opportunity cost of capital) 5%

D1 10
Discount rate 5%

200 price

How much is the price today of a share of a company having the following features:
Expected dividend in one year from now is Eur 10, expected to grow at a constant rate of 1% year on year compounded, disco

D1 10
Discount rate 5%
Growth rate (g) 1%

250 price

How much is the price today of a share of a company having the following features:
Expected dividend in one year from now is Eur 10, expected dividend in two year from now is Eur 11 and expected stay flat for

D1 10 time 1 2
D2 11 Dividend 10 11
Discount rate 5% NPV 9.52 220 perpetuity of 11
209.52 NPV perpetuity
219.05 Σ (price)

How much is the price today of a share of a company having the following features:
Expected dividend in one year from now is Eur 10, expected dividend in two year from now is Eur 11 and
such an expected dividend it is then expected to grow at 1% year on year compouned from year 3 forever, discount rate (oppo
MC: doo not forget to
subtract the growth
D1 10 rate
D2 11 time 1 2 3
Discount rate 5% Dividend 10 11 11.11
Growth rate (g) 1% NPV 9.52 9.98 277.75
251.93
271.43

MC: as per the

calculation above t
NPV of the Annuity
forward is calculat
by discounting at t
MC: as per the
calculation above t
NPV of the Annuity
forward is calculat
by discounting at t
ount rate (opportunity cost of capital) 5%

ate of 1% year on year compounded, discount rate (opportunity cost of capital) 5%

om now is Eur 11 and expected stay flat forever, discount rate (opportunity cost of capital) 5%

MC: attention here,

the NPV of a
perpetuity in 2 years is
the NPV of the
perpetuity of 2-1 years

om now is Eur 11 and

ed from year 3 forever, discount rate (opportunity cost of capital) 5%
MC: doo not forget to
subtract the growth
rate

perpetuity starting forward 2 years

NPV of perpetuity
Σ (price)

MC: as per the

calculation above the
NPV of the Annuity
forward is calculated
by discounting at t-1
MC: as per the
calculation above the
NPV of the Annuity
forward is calculated
by discounting at t-1
 Presentazione 11 - Flussi e valutazione

PROJECT NPV
Data Source. Summary
A PharmaTech is planning the launching of a new drug.
It planss to invest € 12.000 in new plants in year 0, to be depreciated on a straight-line basis over five years. 12,000 Initial Investment
PharmaTech plans to end production at the end of the 6th year and then sell the facility at € 3.000. 3,000 plant selling price
PharmaTech expects annual revenues to be € 20.000 for the first year with a 10% per annum growth for the next 3 yrs 20,000 turnover
The company expects sales to decrease to €12.000 in year 5 and and then revenues to remain constant. 12,000 dropping sales @ year 5
The annual operating monetary costs are expected to be equal to 40% of turnover. 40% Operating Monetary costs
Pharma Tech also plans to support the sale of the new products demanding advertising costs of € 6.000 per year for the next 2 years. 6,000 Advertising expenses
The tax rate (tc) is equal to 30%. 30% Tax Rate
Working capital (operating) expenses are expected to be equal to 10% of turnover. 10% Working Capital Expenses (operating)
PharmaTech is financed entirely via equity. The return required by shareholders is equal to 10%. 10% Return to Shareholders

A) Calculate the "upper part" (up to EBIT) of the Income-awaited mini-company,

for each year of the useful life of the project

Year 0 1 2 3 4 5 6 Comments

Turnover 20,000 22,000 24,200 26,620 12,000 12,000 (a)

Advertising costs -6,000 -6,000 (b)
Operating Costs -8,000 -8,800 -9,680 -10,648 -4,800 -4,800 (c)
Depreciation -2,400 -2,400 -2,400 -2,400 -2,400 (d) linear depreciation
EBIT 3,600 4,800 12,120 13,572 4,800 7,200 (e) = (a) + (b) + (c) + (d)

B) Calculate the tax "theoretical" on EBIT

(as if the project was financed via equity only)

Year 0 1 2 3 4 5 6 Comments

EBIT 3,600 4,800 12,120 13,572 4,800 7,200 (e)

Taxes -1080 -1440 -3636 -4071.6 -1440 -2160 (f) = - (e) x tc
EBIT (1-tc) 2,520 3,360 8,484 9,500 3,360 5,040 (g) = (e) + (f) Net Operating Income After Taxes

C) Re-add to EBIT, net of "theoretical" tax

NON-MONETARY operating costs (depreciation)

Year 0 1 2 3 4 5 6 Comments

EBIT (1-tc) 2,520 3,360 8,484 9,500 3,360 5,040 (g)

Depreciation 2400 2400 2400 2400 2400 0 (h) = - (d) You must, once calculated the actual tax payouts, reinstate the non-cash-out flows (depreciation)
OPERATING CASH FLOW 4,920 5,760 10,884 11,900 5,760 5,040 (i) = (g) + (h)
MC: the difference between a company’s current
operating assets, such as accounts receivable
D) Identify (for each year) CapEx and NWC increases/decreases (customers’ unpaid bills) and inventories of raw
materials and finished goods, and its current
operating liabilities, such as accounts payable. Pay
Year 0 1 2 3 4 5 6 Comments attention: no financial items are included.

Investments and divestments -12,000 3,000 (j) Place the outflows and inflows at the exact time they took place

NWC (operating) 2,000 2,200 2,420 2,662 1,200 0 (k) definition

D NWC -2,000 -200 -220 -242 1,462 1,200 (l) the variation of Net Working Capital (Operating) determines the amount of cash out/in the company

E) In case of disposal, calculate the tax effect on such disposal

Comments
Tax effects of disposals -900 (m) = - (j) x tc The tax burden on capital gain (assets sold is fully depreciated at the end of year 5) is calculated on a stand alone basis
Tax calculation in line 32 did not take into consideration this "unexpected" tax burden since the asset disposal is not part of the recurring operating business
0 1 2 3 4 5 6

Investments / divestments -12,000 3,000 (j)

Tax effects -900 (m)
D NWC -2,000 -200 -220 -242 1,462 1,200 (l)
FLOW from NET INVESTMENTS -12,000 -2,000 -200 -220 -242 1,462 3,300 (n) = (j) + (m) + (l)

Year 0 1 2 3 4 5 6 Comments

NET CASH FLOW -12,000 2,920 5,560 10,664 11,658 7,222 8,340 (o) = (i) + (n) Operating Cash Flows and Flows from Net Investments (with fiscal effect from the residual value of the machine) effetcs combined together provide the Final Cash Flow amount

DISCOUNT RATE 10%

NET PRESENT VALUE -12,000 2,655 4,595 8,012 7,963 4,484 4,708

NPV 20,416

Pagina 8
FCF CALCULATION (Unlevered FCF)

EBITDA
-TAX calculated on EBIT
+/- Delta NWC (operating)
+/- Delta net CapEx (net capital expenditures)

ASSETS LIABILITIES

EQUITY (PPS * N OF SHARES)

ITEMS ARE EXPRESSED
ENTERPRISE ITEMS ARE EXPRESSED @ MARKET VALUE
VALUE @ MARKET VALUE

OR
FIRM VALUE
EV
NFP (NET FINANCIAL POSITION)
ITEMS ARE EXPRESSED
@ MARKET VALUE

TOT 100 TOT 100

ENTERPRISE VALUE - NFP = EQUITY VALUE

 EBIT
-TAX calculated on EBIT
+ D&A
l expenditures) +/- Delta NWC (operating)
+/- Delta net CapEx (net capital expenditures)
 Explicit period
Year 1 2
FCFs 10 12
Discouted FCFs 9.39 10.59

Rf 2.50%
Rm 7.00%
BETA 1.25 Inputs
Rf 2.50%
Ke (or Re) - CAPM 8.13% 1 Rm 7.00%
BETA 1.25
Kd (or Rd) 3.50% Kd (or Rd) 3.50%
Ke (or Re) - CAPM 0.08125
D 30 D 30
E 70 E 70
Tc (Tax Rate) 27.00% Tc (Tax Rate) 27%
g rate 1.0%
WACC 6.45% 2 Financial Debt 40
g rate 1.0% Cash & Equivalent 10

Financial Debt 40
Cash & Equivalent 10
NFP (Net Financial Position) 30
4
Explicit period TV Period (perpetuity)
3 4 5 6
14 16 18 18.18
11.60 12.46 13.17 333.33 Terminal Value
MC: Share of Enterprise
243.82 Discounted Terminal Value Value attributable to
3 Equity after Debt
301.03 Enterprise Value reimboursement (no cost
of debt)

271.03 Equity Value

5
 hare of Enterprise
attributable to
after Debt
oursement (no cost
t)
CASE A Company ALFA - valuation Comparables Companies L
EBIT 10 Eur Mln MC: (Net Financial
NFP 2 Eur Mln Debt = 5; Cash & Market Capitalisation
equivalent = 3)
EBIT
ALFA EVALUATION NFP
EBIT 10
MULTIPLE 11.44 EV
EV / EBIT Multiple
EV 114.39
EQUITY VALUE 112.39

CASE B Company ALFA - valuation Comparables Companies B

EBIT 10 Eur Mln MC: (Net Financial
NFP 2 Eur Mln Debt = 5; Cash & Price agreed (equity v
equivalent = 3) EBIT
ALFA EVALUATION NFP
EBIT 10
MULTIPLE 10.26 EV
EV / EBIT Multiple
EV 102.59
EQUITY VALUE 100.59
Comparables Companies LISTED ON THE STOCK EXCHANGE
GAMMA BETA OMEGA
Market Capitalisation 100 150 200
10 14 18
8 12 15

108 162 215

EV / EBIT Multiple 10.80 11.57 11.94

11.44 AVERAGE MULTIPLE

Comparables Companies BOUGHT / SOLD ON THE M&A MARKET

GAMMA BETA OMEGA
Price agreed (equity v 90 130 180
10 14 18
8 12 15

98 142 195
EV / EBIT Multiple 9.80 10.14 10.83

10.26 AVERAGE MULTIPLE