The table below shows the forecasts for Management plc (in millions of €)

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The table below shows the forecasts for Management plc (in millions of €):

Year

1

2

3

4

5

Sales

3960

4080

4200

4326

4458

Cost of goods sold

1782

1794

1806

1860

1917

Marketing costs

870

897

924

996

1026

Administrative costs

396

408

420

432

447

Depreciation and amortisation

330

315

300

300

300

EBIT (Operating income)

582

666

75o

738

768

The company is expecting annual capital expenditure of €300m per year over the next 5 years; working capital will increase by €50m in years 1 and 2, and stabilize thereafter. The following information is also available: the company has net debts today of €2250m; the company"s cost of equity is estimated at 10%, and the cost of debt at 6% (before tax); financing is split 2/3 equity and 1/3 debt; the tax rate is 37%; an increase in inflows of 2% to perpetuity can be expected from year 6.

Work out the value of Management plc using the DCF method.

 

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