Question 1

From the following information, Calculate the DCF value of the firm:

Financial Forecasts 1 2 3 4 5 6
(Rs in Millions)

Revenues 950 1000 1200 1450 1660 1770

EBDIT 195 200 210 305 330 374
Depreciation 55 85 80 83 85 87
Investment in Capex 100 100 85 100 105 120

Investment in 10 17 70 70 70 54
Working Capital

Additional information includes: Debt-Equity ratio of 0.4 : 1.0, Tax Rate 35%, Pre –
tax cost of debt 12% and cost of equity 16.48%.

BITS Pilani, Pilani Campus

Question 1 - Solution
Financial Forecasts 1 2 3 4 5 6
EBDIT 195.00 200.00 210.00 305.00 330.00 374.00
Dep 55.00 85.00 80.00 83.00 85.00 87.00
EBIT (EBDIT-Dep) 140.00 115.00 130.00 222.00 245.00 287.00
NOPAT (EBIT*(1-t)) 91.00 74.75 84.50 144.30 159.25 186.55
Dep 55.00 85.00 80.00 83.00 85.00 87.00
Investment in Capex or Capex 100.00 100.00 85.00 100.00 105.00 120.00
Investment in WC or Change in WC 10.00 17.00 70.00 70.00 70.00 54.00
FCFF (NOPAT+Dep-Capex-WC) 36.00 42.75 9.50 57.30 69.25 99.55
WACC Cost Weights
Debt (Pre-tax * (1-t) 7.80 0.29 2.23
Equity 16.48 0.71 11.77
WACC 14.00%
Discount Factor 0.88 0.77 0.67 0.59 0.52 0.46
PV (FCFF * Discount Factor) 31.58 32.89 6.41 33.93 35.97 45.35
DCF Value of the firm 186.13

BITS Pilani, Pilani Campus