S.

No Particular amount
1 sales 1000
2 cost of goods sold 60%
3 Selling ,General & Adminsitrative Expenses 150
4 Depreciation (SLM @ 8%) 50
5 Intrest Income 20
6 paid up capital (Rs 10 each) 10 1,000,000
7 free reserves 1600
8 Debt @ Intrest rate of 10% 600
9 Capital expenditure Incurred 20
10 Increase in Net current assets 9
11 Increase in deferred tax liabiity 20
 obervations
Sales growth would be 10% per annum for first 4 years and 5 percent for next 3 years
COGS percentage is expected to be constant
Sellings , generla administrative expenses gows up by 5%
Depreciation for income tax purpose
company needs to invest 10% of the incremental sales into net current asserts.
invest 20 lakhs each for next two years and 15 lakhs thereafter inti CAPEX.
company would have to increase its debts by 10% per annum. New debts would available at the same rate as existing
intrest income is expected to be 25 lakhs each twoyears , 30 lakhs each for next three years and 35 lakhs each for two
income tax rate is expected to be stable at 35%
company would require to increase its privison for deferred taxes by the following respective amounts for next seven
post tax cost of equity is 12%
 XYZ Ltd
1 2 3 4 5 6
particular 2007 2008 2009 2010 2011 2012 2013
net sales 1000 1100 1210 1331 1464.1 1537.305 1614.17
cost of goods sold 600 660 726 798.6 878.46 922.383 968.5022
expenses 150 157.5 165.375 173.6438 182.3259 191.4422 201.0143
depricication 50 52 53 55 56 57 58
total expenses 800 869.5 944.375 1027.244 1116.786 1170.825 1227.516

PBIT/EBITA 200 230.5 265.625 303.7563 347.3141 366.4798 386.6538

(less) tax on EBIT 130 149.825 172.6563 197.4416 225.7541 238.2118 251.3249
(add )depriciation 50 52 53 55 56 57 58
Gross cash flow from
operations 180 201.825 225.6563 252.4416 281.7541 295.2118 309.3249
increase /decrease in
NWC/NCA -9 -10 -11 -12.1 -13.31 -7.3205 -7.68653
(less)capital expenditure 20 20 20 15 15 15 15
free cash flow 151 171.825 194.6563 225.3416 253.4441 272.8913 286.6384
intrest income 20 25 25 30 30 30 35
intrest income net of tax 13 16.25 16.25 19.5 19.5 19.5 22.75
net free cash flow 164 188.075 210.9063 244.8416 272.9441 292.3913 309.3884
PV of free cash flow 170.2 172.7 181.5 183.1 177.5 170.0
 7
2014
1694.879
1016.927
211.0651
60
1287.992

406.8864
264.4762
60

324.4762

-8.07085
15
301.4053
35
22.75
324.1553
161.1
 computation of taxes on EBITA
2008 2009 2010 2011 2012 2013 2014 2015
PBIT 200 230.5 265.625 303.75625 347.31406 366.47977 386.65375 406.88644
add intrest income 20 25 25 30 30 30 35 35
less interest paid 60 66 73.26 81.3186 90.263646 100.19265 111.21384 123.44736
taxable profit 160 189.5 217.365 252.43765 287.05042 296.28712 310.43992 318.43908
tax @ 35% 56 66.325 76.07775 88.353178 100.46765 103.70049 108.65397 111.45368
provision for tax
liability 20 10 24 28 15 19 21 10
total provision for tax
as per books 76 76.325 100.07775 116.35318 115.46765 122.70049 129.65397 121.45368
add tax sheild on intrest
paid 21 23.1 25.641 28.46151 31.592276 35.067426 38.924843 43.206576
less tax on intrest
income 7 8.75 8.75 10.5 10.5 10.5 12.25 12.25
less provision for
deferred tax liability 20 10 24 28 15 19 21 10
taxes on EBITA 70 80.675 92.96875 106.31469 121.55992 128.26792 135.32881 142.41025