Estimate the value of operations of abc ltd

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Reference no: EM133115143

ABC Ltd is a software company located in Nairobi Kenya. The following information is provided for the most recent accounting period

S/NO

ITEM

(Sh' Millions)

1.

EBIT

30

2.

SALES

60

3.

investment in property, plant and equipment

10

4.

Working capital investment was

3

5.

Amortization and Depreciation

5

Additional Information

(i) The firms expect earnings before interest and taxes, investment in property, plant and equipment, investment in working Capital, Amortization and Depreciation and  sales to grow at an annual rate of 5 percent each year for 20 years. After the twenty year growth period the growth in sales, earnings before interest and taxes, and working capital investment will decline to stable 3 percent per year, and investment in property, plant and equipment and Amortization and Depreciation will offset each other.

(ii) The company has an effective tax rate of 30 percent. 

(iii) The estimated weighted average cost of capital is 10percent.

Required:

Estimate the value of operations of ABC Ltd.

Reference no: EM133115143

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