What extent the company will be able to buy back its shares

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Reference no: EM133076939

Question - AS Rahaveski is an Estonian company that is reassessing its current dividend policy based on the information below.

 

2022

2023

2024

Revenue

1,200

1,400

1,600

Net profit

30

70

140

Working capital requirement (excluding cash) % of sales revenue

12.5%

10%

8%

Dividend payout multiplier *

0.00%

10%

20%

* Dividend payout multiplier - cash dividends / net profit.

At the moment (at the end of 2021), the company's working capital requirement is 150 million euros (based on the 2022 sales revenue forecast) and the company's cash balance is 30 million euros.

The company forecasts that next year (2022) the amount of depreciation will be 75 million and 110 million is planned for fixed asset investments. The company forecasts that the amount of depreciation will increase by 10% per year in the coming years and investments in fixed assets by 8% per year.

The company wants to increase its cash balance to 60 million in 2024 and buy back shares for the remaining amount.

Your task is to find out if and to what extent the company will be able to buy back its shares at the end of 2024.

Reference no: EM133076939

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