Reference no: EM132993538

Ana Company shared the following prospective financial information to a group of private equity investors:

at 2022 (Revenue is 2,250,000; Cost of Goods Sold is 1,312,500 ; Operating Expense is 650,000);

at 2023 (Revenue is 2,750,000; Cost of Goods Sold is 1,437,500; Operating Expense is 750,000);

at 2024 (Revenue is 3,250,000; Cost of Goods Sold is 1,562,500; Operating Expense is 850,000).

• Interest expense is 20,000 and income tax rate is at 20%. Depreciation is 600,000. Ana Company estimated that it needs P200,000 cash on an annual basis to sustain its capital investments. From 2025 until perpetuity, the company estimates net cash flows to grow at constant rate of 4%. Ana Company has debt-to-equity ratio of 3:1. After-tax cost of debt is 9.33% while cost of equity is at 12%. Ana Company also has outstanding loans of P2,000,000.

Problem 1: Compute for net income for Year 2022.

Problem 2: Compute for the terminal value.

Problem 3: Compute for the weighted average cost of capital.