EXAMPLE 16 A Two-Stage FCFE Valuation Model with a Constant Growth Rate in Each Stage Uwe Henschel is doing a valuation

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Example 16 A Two Stage Fcfe Valuation Model With A Constant Growth Rate In Each Stage Uwe Henschel Is Doing A Valuation 1 (30.85 KiB) Viewed 48 times

EXAMPLE 16 A Two-Stage FCFE Valuation Model with a Constant Growth Rate in Each Stage Uwe Henschel is doing a valuation of TechnoSchaft on the basis of the following information: . • Year O sales per share = €25. Sales growth rate = 20 percent annually for three years and 6 percent annually thereafter. • Net profit margin = 10 percent forever. Net investment in fixed capital (net of depreciation) - 50 percent of the sales increase • Annual increase in working capital = 20 percent of the sales increase • Debt financing -40 percent of the net investments in capital equipment and working capital • TechnoSchaft beta = 1.20; the risk-free rate of return = 7 percent; the equity risk premium = 4.5 percent.