- This topic has 3 replies, 2 voices, and was last updated 8 years ago by
John Moffat.
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- April 23, 2016 at 3:32 pm #312374
in the latest bpp text (page 321) there is a worked example to value a target. i have reproduced the answer that uses FCF and EVA.
year ————0———-1————-2————-3————-4————-5
Invested
Capital——2000——-1600—–1200———800———-400———-0NOPAT —–0————–88———160——–400———–440———200
Less
change in
invested
capital——-(2000)——400——–400——-400————400——–400
FCF———-(2000)——488——–560——-800———–840———600
DF
WACC 10%—-1———.91———-.83——–.75———–.68———-..62
PV OF
CASHFLOW-(2000)—-444——–463——–601———-574———–373
NPV=454—————————————————————————————————-
ROIC (%)———————4——–10————–33———-55————50
EVA=(ROIC-WACC) X
BV CAPITAL
INVESTED——————(112)—–0————–280———360———-160
WACC 10%——-1———.91———-.83——–.75———–.68———-..62
PV OF
EVA—————————-(102)——–0———-210———–246———-99
PV=454pls note that there is no question…they just show this working.
i dont understand where/how they get (112) in the lower working
thanks
April 24, 2016 at 8:58 am #312450I don’t have the BPP text and so I can’t really help you with this.
(I wouldn’t worry too much anyway because EVA is being removed from the P4 syllabus as from September and it is therefore extremely unlikely that it will be asked in June.)
April 24, 2016 at 3:40 pm #312500oh!!! and i spent 2 days struggling with it…
thank u !!
April 25, 2016 at 6:23 am #312564You are welcome 🙂
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