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As a result of MEXIT, Telford Engineering had lost 30% of its pre-MEXIT export sales to CETA customers, due to increased trade and tariff barriers with CETA. (See P/L account before MEXIT in the spreadsheet). A new opportunity has now been negotiated to sell the original 30% post-MEXIT loss in CETA exports to a range of customers in alternative export markets on another continent. These can be sold at the same price, bringing the factory back to full capacity. The materials cost of these additional sales, as a percentage of sales to the nearest whole percentage, will be the same as it is currently (See P/L account one year after MEXIT under the outsource option in the spreadsheet).
Calculate the effect on net profit (to the nearest $M’000). For your answer only provide the first three numbers and do not include any symbols, for example, “543”.
Please I need help with this. Someone please guide me.
If you remember in the Exitus Co question we were to find the Equity Vale of Acta. After the FCF you would end up with the value of the entire firm inclusive of debt but they asked for the equity value. A pointer to the fact that we will arrived at the overall value would be that we discounted with the Cost of Capital. But we were given a debt to equity ratio of Exitus Co as 30:70. For me I stated in my excel sheet that “assume the debt to equity ratio of Acta Co is same as Exitus Co”. I then multiplied my FCF by 70% to arrive at my Equity value of Acta Co. Anyone with an alternative approach at arriving at the Equity value of Acta Co?