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