Page 378 - F3 Integrated Workbook STUDENT 2019
P. 378

Chapter 12









                   Example 6





                   Chassagne Co is considering making a bid for Butler Co, a rival company.

                   The following information should be used to value Butler Co.

                   Statement of profit or loss for the most recent accounting period

                                                                                  GBPm
                   Revenue                                                          285.1
                   Cost of sales                                                   (120.9)
                                                                                   –––––
                   Gross profit                                                     164.2
                   Operating expenses (inc depreciation GBP 12.3m)                   (66.9)
                                                                                   –––––
                   Profit from operations                                            97.3
                   Finance costs                                                     (10.0)
                                                                                   –––––
                   Profit before tax                                                 87.3
                   Taxation                                                          (21.6)
                                                                                   –––––
                   Profit after tax                                                  65.7
                                                                                   –––––
                   Other information:

                       selling prices are expected to rise at 3% per year for the next 3 years and
                        then stay constant thereafter.

                       sales volumes are expected to rise at 5% per year for the next 3 years
                        and then stay constant thereafter.

                       assume that cost of sales is a completely variable cost, and that other
                        operating expenses (including depreciation) are expected to stay
                        constant.

                       Butler Co invested GBP 15m in non-current assets and GBP 2m in
                        working capital last year. These annual amounts are expected to stay
                        constant in future.







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