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Chapter 10
Example 5
The expected after-tax cash flows of Thomas, an all equity financed company
with 2 million shares in issue, will be as follows:
Year GBP
1 120,000
2 100,000
3 140,000
4 50,000
5 onwards 130,000
A suitable cost of capital is 12%.
What is the value of Thomas's equity (in total) using the DCF basis of
valuation?
A GBP 392,050
B GBP 1,006,300
C GBP 1,083,333
D GBP 1,475,383
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