What is the new equity value after the project

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AT is considering a new investment project. The project requires a permanent increase of PPE of 100M, starting from FY T+1 (the year when the new investment is made) with respect to the baseline you projected so far. The benefit of the project is that, starting from FY T+2, it will increase operating efficiency by permanently reducing the COGS to Sales Ratio by 2% (that is, the new COGS to Sales ratio will be equal to the baseline ratio multiplied by 0.98) and it will decrease the inventory requirements by lowering the Inventory to COGS ratio by 5% (again, the new Inventory to COGS ratio will be equal to the baseline ratio multiplied by 0.95).

1. What is the new equity value after the project is undertaken, and how does it compare to the equity value in the baseline scenario?

2. What is the incremental FCF generated by the project in the Forecast Horizon, and the incremental Terminal Value?

3. What is the PV of the incremental FCF in the Forecast Horizon, and the incremental Terminal Value?

4. How is this value related to the equity values in the baseline scenarios and that after the project is undertaken?

Reference no: EM132978846

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