Q.

Sol DCF Method

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Q. Sol DCF Method

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Div
Discounted Cash Flow Method Value of Firm - Enterprise Value
Explicit Period
Particulars 0 1 2
Years 2023 2024 2025
Sales 280000 350000
Variable cost@30% 84000 105000
Fixed cost 25000 25000
EBITDA/Operating profit 171000 220000
Depreciation - Working note 1 37500 41250
EBIT 133500 178750
Tax@30% 40050 53625
EBIT*(1-T) 93450 125125
Depreciation - Working note 1 37500 41250
Capex 50000 75000
Working capital investment/change in working capital - w.n.2 3000 7000
Free Cash flow to the Firm 77,950 84,375
Present value of FCFF - Expected FCFF/(1+Ko)^n 67,783 63,800
Explicit period value - A 193,867

Terminal period value - FCFF2027*(1+g)/(KO-g)

Expected FCFF for 2028 - FCFF2027*(1+G)
Terminal period value for the year end 2027=FCFF2028/(Ko-g)
Present value of terminal period - V4/(1+Ko)^4 - B 309,918

Enterprise Value - A+B 503,786

Acquisation Price 800,000
Goodwill 296,214

Discounted Cash Flow Method Value of Equity

Explicit Period
Particulars 0 1 2
Years 2023 2024 2025
Sales 280000 350000
Variable cost@30% 84000 105000
Fixed cost 25000 25000
EBITDA/Operating profit 171000 220000
Depreciation - Working note 1 37500 41250
EBIT 133500 178750
Interest@12% - Working Note 3 18000 16200
EBT 115500 162550
Tax@30% 34650 48765
PAT 80850 113785
Depreciation - Working note 1 37500 41250
Capex 50000 75000
Working capital investment/change in working capital - w.n.2 3000 7000
Repayment of Debt - W.N.3 15000 13500
Free Cash flow to the equity 50350 59535
Present values of the expected FCFE - Expected FCFE/(1+Df)^n 41,976 41,378
Explicit period value - A 114,496

Terminal period value - FCFE2027*(1+g)/(Ke-g)

Expected FCFE for 2028 - FCFE2027*(1+G)
Terminal period value for the year end 2027=FCFE2028/(KE-g)
Present value of terminal period - V4/(1+Ke)^4 - B 106,882

Intrinsic Value of Equity - A+B 221,377

No of equity shares - (Equity capital/Face value per share) 2000.00
IV Per equity shares 111
Face Value per equity share 100
CMP 150.00
Book value per equity - (Total equity capital,Networth/No of
equity shares) 100
of Firm - Enterprise Value
Explicit Period
3 4 5
2026 2027 2028
330000 460000
99000 138000
40000 40000
191000 282000
47125 57412.5
143875 224587.5
43162.5 67376.25
100712.5 157211.25
47125 57412.5
100000 150000
-2000 13000
49,838 51,624
32,769 29,516

Add
54204.9375
542049.375 Less

FCFE
Explicit Period
3 4 5
2026 2027 2028
330000 460000
99000 138000
40000 40000
191000 282000
47125 57412.5
143875 224587.5 If company pays interest - Tax paid 34650
14580 13122 if company does not pay interest - Tax paid 40050
129295 211465.5 Tax saving due to payment of interest - 5400
38788.5 63439.65 Net effective interest cost - 18000-5400 = 12600
90506.5 148025.85 Net effective interest rate - 12600/150000*100 = 8.4%
47125 57412.5 Kdt - Kd*(1-t)
100000 150000 0.084
-2000 13000
12150 10935
27481.5 31503.35
15,924 15,218

33,079
221,261
 Given:
Tax Rate 0.3
1-t 0.7
Dep Rate 0.1 DBM
Kd 0.12 Cost of debt
Wd 0.4285714285714
Ko(WACC) 0.15 Firm
Growth Rate 0.05
VC 0.3 Revenue
WC(CA) 0.1 Revenue
We 0.5714285714286
Ke ?
Kdt 0.084

Working note 1
Calculation of Depreciation
Particulars 2024 2025 2026 2027
Opening balance of Long term assets 325000 337500 371250 424125
Capex Buying 50000 75000 100000 150000
Gross Fixed assets 375000 412500 471250 574125
Depreciation@10% 37500 41250 47125 57412.5
Closing Balance of Long term assets 337500 371250 424125 516712.5

Working note 2
Calculation of change in working capita 2023 2024 2025 2026
Particulars 0 1 2 3

Working capital 25000 28000 35000 33000

Change in working capital 3000 7000 -2000

Working Note 3
Calculation of Interest cost 1 2 3 4
Particulars 2024 2025 2026 2027
Opening Balance of debt 150000 135000 121500 109350
Interest cost@12% 18000 16200 14580 13122
Repayment of debt@10% 15000 13500 12150 10935
Closing Balance of Debt 135000 121500 109350 98415

Working Note 4
Claculation of Cost of Equity
0*100 = 8.4%
WACC/Ko Ke+Kd
WACC/Ko (Ke*we)+(Kd*wd)
WACC/Ko (Ke*we)+(Kdt*wd)

Ke (WACC- Kdt*wd)/we
Ke 0.20
 2027
4

46000

13000
 Industry Average pe 2.75
Income Statement of A Ltd. EPS of A ltd 29.8155
Particulars 2015 ₹ in lakhs Price of A ltd in the market 81.99
Net Sales 9,855
Other Income 87 EPS of A ltd
Total Income 9,942 Income 9949
Cost Of Material Consumed 3,833 Less Expenses 5362
Changes In Inventories 67 PBT 4587
Employee Cost 820 Less - taxes 1605.45
Finance Cost- Interest 140 PAT 2981.55
Depreciation And Amortization Expenses 346 Div - No of equity shares 100.00
Other Expenses 156 EPS of A ltd 29.8155
Exceptional Income 7
No. Of Equity Shares 100

Tax rate=35%
Details of peer group company
Name of the company x y Z
EPS 50 20 90
MPS 150 45 270
P/E 3 2.25 3

Calculate whether TCS is overpriced or underpriced

as on December 31, 2023 using TTM PE

Name of the company Market Price as on December 31, TTM EPS as on Dec 31, 2023 TTM P/E as on Dec 31, 2023

Infy 1542.9 58.77 26

Wipro 471 21.06 22
HCL 1466 57.85 25
Average Industry IT TTM PE 25

TCS TTM EPS as on 31.12.2023 123

What should be the price of TCS as on 31.12.2023 3022
What was the price of TCS as on 31.12.2023 3,793
What is the current price of TCS as on date 3810
Overly priced
Startup Case:

Sol.:
1 Ownership Position of the Investor
2 Post money investment of the firm's equity
3 Pre-money investment

Given:
Kpe 0.35
PE Investment 3000 mn
Projected EBITDA 4000 mn
Debt 2500 mn
Cash 800 mn
AVG of Industry EBITDA Multiple -EV/EBITDA 6 times
Investment for a period 5 years
 Ownership Position = Req Value
1 of PE Investor
/Est Eq Share Value
A Req Value of PE Investor FV = PV*(1+i)^n 13452.100313

13452.100313 mn

B Est Eq Share Value Proj EBITDA * EBITDA Multiple + Cash - Debt

22300 mn

Therefore, OP (A/B) 0.6032

2 Post-money Investment value: Walmart - Flipkart Deal

A Funds invested by PE 3000 mn Walmart Inv 16

B Ownership Position 0.6032 100% OP 0.77

Therefore, Post-money (A/B) 4973.2010947 mn Post-Money 20.779220779

Pre Money 4.7792207792
3 Pre-money Invesment:
A Post Money Inv 4973.2010947 mn
B Funds invested by PE 3000 mn
Therefore, Pre-money Inv 1973.2010947 mn
(A-B)
100%??