rosario acero s.a - larry
DESCRIPTION
perhitunganTRANSCRIPT
APPENDIX 1
Financial Ratio of Rosario AceroEvaluation
Year
Ratio 1994 1995 1996 1994-1996
LIQUIDITY
Current Ratio 0.88 0.78 0.93 ok
Quick Ratio 0.39 0.36 0.57 ok
ACTIVITY
Inventory Turnover 3.50 4.55 5.91 ok
Average Collection Period 44.16 52.03 70.75 deteriorating
Average Payment Period 65.76 50.37 60.70 ok
Total Asset Turnover 1.07 1.15 1.32 deteriorating
LEVERAGE
Debt Ratio 96.63% 92.51% 86.42% deteriorating
Times Interest Earned Ratio 2.11 0.72 2.94 ok
PROFITABILITY
Gross Profit Margin 27.69% 18.12% 20.62% ok
Operating Profit Margin 13.35% 3.96% 9.25% ok
Net Profit Margin 4.01% 3.39% 5.06% ok
Return on Total Assets 4.51% 3.91% 6.66% ok
Return on Equity 127.38% 52.23% 49.01% deteriorating
Time series
Exhibit 2
ALTERNATIVE 2 & 3Issue stock through local investment bank by Initial Public Offering (IPO) at $9 per share &Issue eight-year senior notes Convertible bonds with coupon rate 13%.
input
revenue growth rate 10.30% inventory/revenues 13.00%
COGS/Revenues 78.00% ot cur asset/rev 1.00%
SG&A/Revenues 13.00% gross fixed asset/rev 48.00%
Tax rate 34.00% acc payable/rev 14.00%
depreciation/gross fixed asset 5.60% oth cur liab/revenue 7.00%
cash/revenue 1.00% interest change 10.00%
acc receivable/revenues 20.00% change in def'd tax/tax 25.00%
base lending rate 8.50% primary shares 233,000
Fully diluted shares 273,000
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 38.38 42.34 46.70 51.51 56.81 62.67
cost of good sold (27.65) (29.94) (33.02) (36.43) (40.18) (44.32) (48.88)
selling, gen'l, and admin (3.96) (4.99) (5.50) (6.07) (6.70) (7.39) (8.15)
EBIT 3.19 3.45 3.81 4.20 4.64 5.11 5.64
interest (notes &loans) (1.10) (0.73) (0.70) (0.65) (0.59) (0.51) (0.41)
interest (notes &loans) (0.98) (0.98) (0.98) (0.98) (0.98) (0.98)
profit before tax 2.09 1.75 2.14 2.58 3.07 3.63 4.25
taxes 0.00 0.59 0.73 0.88 1.04 1.23 1.45
Profit after tax 2.09 1.15 1.41 1.70 2.03 2.39 2.81
profit with extraord. Item 1.76
earnings per share 7.57 4.96 6.04 7.29 8.70 10.28 12.06
Balance Sheet
Actual Projected
1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.38 0.42 0.47 0.52 0.57 0.63
accounts receivable 6.80 7.68 8.47 9.34 10.30 11.36 12.53
inventory 4.70 4.99 5.50 6.07 6.70 7.39 8.15
other current assets 0.40 0.38 0.42 0.47 0.52 0.57 0.63
total current assets 12.10 13.43 14.82 16.34 18.03 19.88 21.93
Gross fixed assets 16.70 18.42 20.32 22.42 24.72 27.27 30.08
accumulated depreciation (2.50) (3.53) (4.67) (5.93) (7.31) (8.84) (10.52)
net fixed assets 14.20 14.89 15.65 16.49 17.41 18.43 19.56
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 28.43 30.57 32.93 35.54 38.42 41.59
Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
accounts payable 4.60 5.37 5.93 6.54 7.21 7.95 8.77
other current liabilities 2.30 2.69 2.96 3.27 3.61 3.98 4.39
tot current liabilities Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 7.50 7.50 7.50 7.50 7.50 7.50
deffered taxes 1.30 1.45 1.63 1.85 2.11 2.42 2.78
total liabilities Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
common stock 0.20 0.20 0.20 0.20 0.20 0.20 0.20
paid-in-surplus 0.20 0.20 0.20 0.20 0.20 0.20 0.20
retained earnings 3.20 4.35 5.76 7.47 9.49 11.89 14.70
tot liabilities and equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
notes payable(or excess cash)
Comparative Ratios
1997 1998 1999 2000 2001 2002
EBIT/interest 2.90 2.03 2.27 2.59 2.96 3.44 4.07
EBIT/(interest+amort) 1.93 0.36 1.95 2.00 2.06 2.11 2.16
liabilities/equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
(debt/notes)/equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
profit/revenues 6.01% 3.01% 3.33% 3.64% 3.93% 4.21% 4.48%
profit/equity 48.89% 24.29% 22.86% 21.63% 20.49% 19.49% 18.60%
Forecast of Free Cash Flow : Growth Financed with debt and warrants
Projected
1997 1998 1999 2000 2001 2002
EBIT 3.45 3.81 4.20 4.64 5.11 5.64
taxes 1.17 1.30 1.43 1.58 1.74 1.92
earnings before interest 2.28 2.51 2.77 3.06 3.37 3.72
plus depreciation 1.03 1.14 1.26 1.38 1.53 1.68
less: capital expenditures (1.72) (1.90) (2.09) (2.31) (2.55) (2.81)
less:add to net work cap (0.17) (0.55) (0.61) (0.67) (0.74) (0.82)
free cash flow 1.42 1.20 1.33 1.46 1.61 1.78
Exhibit 3
ALTERNATIVE 2Issue stock through local investment bank by Initial Public Offering (IPO) at $9 per share.
input
revenue growth rate 10.30% inventory/revenues 13.00%
COGS/Revenues 78.00% ot cur asset/rev 1.00%
SG&A/Revenues 13.00% gross fixed asset/rev 48.00%
Tax rate 34.00% acc payable/rev 14.00%
depreciation/gross fixed asset 5.60% oth cur liab/revenue 7.00%
cash/revenue 1.00% interest change 10.00%
acc receivable/revenues 20.00% change in def'd tax/tax 25.00%
base lending rate 8.50% primary shares 233,000
1997+primary shares 1,066,333
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 38.38 42.34 46.70 51.51 56.81 62.67
cost of good sold (27.65) (29.94) (33.02) (36.43) (40.18) (44.32) (48.88)
selling, gen'l, and admin (3.96) (4.99) (5.50) (6.07) (6.70) (7.39) (8.15)
EBIT 3.19 3.45 3.81 4.20 4.64 5.11 5.64
interest (notes &loans) (1.10) (0.68) (0.60) (0.50) (0.37) (0.23) (0.07)
interest (notes &loans) 0.00 0.00 0.00 0.00 0.00 0.00
profit before tax 2.09 2.77 3.21 3.70 4.27 4.88 5.57
taxes 0.00 0.94 1.09 1.26 1.45 1.66 1.89
Profit after tax 2.09 1.83 2.12 2.44 2.82 3.22 3.68
profit with extraord. Item 1.76
earnings per share 7.57 1.72 1.99 2.29 2.64 3.02 3.45
Actual Projected
Balance Sheet 1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.38 0.42 0.47 0.52 0.57 0.63
accounts receivable 6.80 7.68 8.47 9.34 10.30 11.36 12.53
inventory 4.70 4.99 5.50 6.07 6.70 7.39 8.15
other current assets 0.40 0.38 0.42 0.47 0.52 0.57 0.63
total current assets 12.10 13.43 14.82 16.34 18.03 19.88 21.93
Gross fixed assets 16.70 18.42 20.32 22.42 24.72 27.27 30.08
accumulated depreciation (2.50) (3.53) (4.67) (5.93) (7.31) (8.84) (10.52)
net fixed assets 14.20 14.89 15.65 16.49 17.41 18.43 19.56
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 28.43 30.57 32.93 35.54 38.42 41.59
Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
accounts payable 4.60 5.37 5.93 6.54 7.21 7.95 8.77
other current liabilities 2.30 2.69 2.96 3.27 3.61 3.98 4.39
tot current liabilities Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 0.00 0.00 0.00 0.00 0.00 0.00
deffered taxes 1.30 1.54 1.81 2.12 2.49 2.90 3.37
total liabilities Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
common stock 0.20 1.20 1.20 1.20 1.20 1.20 1.20
paid-in-surplus 0.20 6.70 6.70 6.70 6.70 6.70 6.70
retained earnings 3.20 5.03 7.15 9.59 12.41 15.63 19.31
tot liabilities and equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
notes payable(or excess cash)
Comparative Ratios
1997 1998 1999 2000 2001 2002
EBIT/interest 2.90 5.08 6.35 8.41 12.53 22.23 80.57
EBIT/(interest+amort) 1.93 0.37 2.27 2.32 2.38 2.43 2.48
liabilities/equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
(debt/notes)/equity Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
profit/revenues 5.06% 4.77% 5.00% 5.23% 5.47% 5.67% 5.87%
profit/equity 48.89% 14.16% 14.08% 13.97% 13.86% 13.70% 13.51%
Forecast of Free Cash Flow : Growth Financed with initial public offering
Projected
1997 1998 1999 2000 2001 2002
EBIT 3.45 3.81 4.20 4.64 5.11 5.64
taxes 1.17 1.30 1.43 1.58 1.74 1.92
earnings before interest 2.28 2.51 2.77 3.06 3.37 3.72
plus depreciation 1.03 1.14 1.26 1.38 1.53 1.68
less: capital expenditures (1.72) (1.90) (2.09) (2.31) (2.55) (2.81)
less:add to net work cap (0.17) (0.55) (0.61) (0.67) (0.74) (0.82)
free cash flow 1.42 1.20 1.33 1.46 1.61 1.78
Exhibit 4
Sensitivity Analysis 1 ( For alternative 1 &3)input Most likely Pessimistic Optimistic
revenue growth rate 10.30% 8.50% 12% inventory/revenues 13.00%
COGS/Revenues 78.00% ot cur asset/rev 1.00%
SG&A/Revenues 13.00% gross fixed asset/rev 48.00%
Tax rate 34.00% acc payable/rev 14.00%
depreciation/gross fixed asset 5.60% oth cur liab/revenue 7.00%
cash/revenue 1.00% interest change 10.00%
acc receivable/revenues 20.00% change in def'd tax/tax 25.00%
base lending rate 8.50% primary shares 233,000
Fully diluted shares 273,000
Pessimistic
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 37.76 40.97 44.45 48.23 52.33 56.78
cost of good sold (27.65) (29.45) (31.95) (34.67) (37.62) (40.82) (44.28)
selling, gen'l, and admin (3.96) (4.91) (5.33) (5.78) (6.27) (6.80) (7.38)
EBIT 3.19 3.40 3.69 4.00 4.34 4.71 5.11
interest (notes &loans) (1.10) (0.73) (0.70) (0.65) (0.59) (0.51) (0.41)
interest (notes &loans) (0.98) (0.98) (0.98) (0.98) (0.98) (0.98)
profit before tax 2.09 1.69 2.01 2.38 2.78 3.22 3.72
taxes 0.00 0.58 0.68 0.81 0.94 1.10 1.27
Profit after tax 2.09 1.12 1.33 1.57 1.83 2.13 2.46
profit with extraord. Item 1.76
earnings per share 7.57 4.80 5.70 6.73 7.86 9.13 10.55
Balance Sheet
Actual Projected
1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.38 0.41 0.44 0.48 0.52 0.57
accounts receivable 6.80 7.55 8.19 8.89 9.65 10.47 11.36
inventory 4.70 4.91 5.33 5.78 6.27 6.80 7.38
other current assets 0.40 0.38 0.41 0.44 0.48 0.52 0.57
total current assets 12.10 13.22 14.34 15.56 16.88 18.31 19.87
Gross fixed assets 16.70 18.12 19.66 21.34 23.15 25.12 27.25
accumulated depreciation (2.50) (3.51) (4.62) (5.81) (7.11) (8.51) (10.04)
net fixed assets 14.20 14.61 15.05 15.52 16.04 16.60 17.21
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 27.92 29.49 31.18 33.02 35.02 37.18
Err:523 (1.09) (1.32) (1.42) (1.71) (2.21) (2.93)
accounts payable 4.60 5.29 5.74 6.22 6.75 7.33 7.95
other current liabilities 2.30 2.64 2.87 3.11 3.38 3.66 3.97
tot current liabilities Err:523 6.84 7.28 7.91 8.42 8.78 8.99
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 7.50 7.50 7.50 7.50 7.50 7.50
deffered taxes 1.30 1.44 1.44 1.44 1.44 1.44 1.44
total liabilities Err:523 23.21 23.46 23.59 23.59 23.45 23.17
common stock 0.20 0.20 0.20 0.20 0.20 0.20 0.20
paid-in-surplus 0.20 0.20 0.20 0.20 0.20 0.20 0.20
retained earnings 3.20 4.32 5.65 7.21 9.05 11.17 13.63
tot liabilities and equity Err:523 27.93 29.50 31.20 33.04 35.03 37.20
notes payable(or excess cash)
Optimistic
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 38.98 42.99 47.42 52.30 57.69 63.63
cost of good sold (27.65) (30.40) (33.53) (36.99) (40.80) (45.00) (49.63)
selling, gen'l, and admin (3.96) (5.07) (5.59) (6.16) (6.80) (7.50) (8.27)
EBIT 3.19 3.51 3.87 4.27 4.71 5.19 5.73
interest (notes &loans) (1.10)
interest (notes &loans) (0.98) (0.98) (0.98) (0.98) (0.98) (0.98)
profit before tax 2.09 2.53 2.89 3.29 3.73 4.22 4.75
taxes 0.00 0.86 0.98 1.12 1.27 1.43 1.62
Profit after tax 2.09 1.67 1.91 2.17 2.46 2.78 3.14
profit with extraord. Item 1.76
earnings per share 7.57 7.17 8.20 9.33 10.57 11.95 13.46
Balance Sheet
Actual Projected
1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.39 0.43 0.47 0.52 0.58 0.64
accounts receivable 6.80 7.80 8.60 9.48 10.46 11.54 12.73
inventory 4.70 5.07 5.59 6.16 6.80 7.50 8.27
other current assets 0.40 0.39 0.43 0.47 0.52 0.58 0.64
total current assets 12.10 13.64 15.05 16.60 18.31 20.19 22.27
Gross fixed assets 16.70 18.71 20.64 22.76 25.11 27.69 30.54
accumulated depreciation (2.50) (3.55) (4.70) (5.98) (7.38) (8.93) (10.64)
net fixed assets 14.20 15.16 15.93 16.78 17.72 18.76 19.90
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 28.90 31.08 33.48 36.13 39.05 42.27
Err:523 (1.00) (1.63) (2.13) (2.78) (3.62) (4.68)
accounts payable 4.60 5.46 6.02 6.64 7.32 8.08 8.91
other current liabilities 2.30 2.73 3.01 3.32 3.66 4.04 4.45
tot current liabilities Err:523 7.18 7.40 7.83 8.20 8.49 8.68
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 7.50 7.50 7.50 7.50 7.50 7.50
deffered taxes 1.30 1.52 1.76 2.04 2.36 2.72 3.12
total liabilities Err:523 23.63 23.89 24.10 24.29 24.44 24.53
common stock 0.20 0.20 0.20 0.20 0.20 0.20 0.20
paid-in-surplus 0.20 0.20 0.20 0.20 0.20 0.20 0.20
retained earnings 3.20 4.87 6.78 8.95 11.42 14.20 17.34
tot liabilities and equity Err:523 28.90 31.07 33.45 36.11 39.04 42.27
notes payable
(or excess cash)
Sensitivity Analysis 2 (Alternative 2)input Most likely Pessimistic Optimistic
revenue growth rate 10.30% 8.50% 12% inventory/revenues 13.00%
COGS/Revenues 78.00% ot cur asset/rev 1.00%
SG&A/Revenues 13.00% gross fixed asset/rev 48.00%
Tax rate 34.00% acc payable/rev 14.00%
depreciation/gross fixed asset 5.60% oth cur liab/revenue 7.00%
cash/revenue 1.00% interest change 10.00%
acc receivable/revenues 20.00% change in def'd tax/tax 25.00%
base lending rate 8.50% primary shares 233,000
1997+primary shares 1,066,333
Pessimistic
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 37.76 40.97 44.45 48.23 52.33 56.78
cost of good sold (27.65) (29.45) (31.95) (34.67) (37.62) (40.82) (44.28)
selling, gen'l, and admin (3.96) (4.91) (5.33) (5.78) (6.27) (6.80) (7.38)
EBIT 3.19 3.40 3.69 4.00 4.34 4.71 5.11
interest (notes &loans) (1.10)
interest (notes &loans) 0.00 0.00 0.00 0.00 0.00 0.00
profit before tax 2.09 3.40 3.69 4.00 4.34 4.71 5.11
taxes 0.00 1.16 1.25 1.36 1.48 1.60 1.74
Profit after tax 2.09 2.24 2.43 2.64 2.86 3.11 3.37
profit with extraord. Item 1.76
earnings per share 7.57 2.10 2.28 2.48 2.69 2.91 3.16
Actual Projected
Balance Sheet 1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.38 0.41 0.44 0.48 0.52 0.57
accounts receivable 6.80 7.55 8.19 8.89 9.65 10.47 11.36
inventory 4.70 4.91 5.33 5.78 6.27 6.80 7.38
other current assets 0.40 0.38 0.41 0.44 0.48 0.52 0.57
total current assets 12.10 13.22 14.34 15.56 16.88 18.31 19.87
Gross fixed assets 16.70 18.12 19.66 21.34 23.15 25.12 27.25
accumulated depreciation (2.50) (3.51) (4.62) (5.81) (7.11) (8.51) (10.04)
net fixed assets 14.20 14.61 15.05 15.52 16.04 16.60 17.21
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 27.92 29.49 31.18 33.02 35.02 37.18
Err:523 (2.07) (3.41) (4.59) (5.91) (7.39) (9.02)
accounts payable 4.60 5.29 5.74 6.22 6.75 7.33 7.95
other current liabilities 2.30 2.64 2.87 3.11 3.38 3.66 3.97
tot current liabilities Err:523 5.86 5.19 4.74 4.22 3.60 2.90
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 0.00 0.00 0.00 0.00 0.00 0.00
deffered taxes 1.30 1.30 1.30 1.30 1.30 1.30 1.30
total liabilities Err:523 14.59 13.72 12.77 11.75 10.63 9.43
common stock 0.20 1.20 1.20 1.20 1.20 1.20 1.20
paid-in-surplus 0.20 6.70 6.70 6.70 6.70 6.70 6.70
retained earnings 3.20 5.44 7.88 10.52 13.38 16.49 19.86
tot liabilities and equity Err:523 27.93 29.50 31.19 33.03 35.02 37.19
notes payable(or excess cash)
Optimistic
Actual Projected
Income statement 1996 1997 1998 1999 2000 2001 2002
Revenues 34.80 38.98 42.99 47.42 52.30 57.69 63.63
cost of good sold (27.65) (30.40) (33.53) (36.99) (40.80) (45.00) (49.63)
selling, gen'l, and admin (3.96) (5.07) (5.59) (6.16) (6.80) (7.50) (8.27)
EBIT 3.19 3.51 3.87 4.27 4.71 5.19 5.73
interest (notes &loans) (1.10)
interest (notes &loans) 0.00 0.00 0.00 0.00 0.00 0.00
profit before tax 2.09 3.51 3.87 4.27 4.71 5.19 5.73
taxes 0.00 1.19 1.32 1.45 1.60 1.77 1.95
Profit after tax 2.09 2.32 2.55 2.82 3.11 3.43 3.78
profit with extraord. Item 1.76
earnings per share 7.57 2.17 2.39 2.64 2.91 3.21 3.54
Balance Sheet
Actual Projected
1996 1997 1998 1999 2000 2001 2002
Cash 0.20 0.39 0.43 0.47 0.52 0.58 0.64
accounts receivable 6.80 7.80 8.60 9.48 10.46 11.54 12.73
inventory 4.70 5.07 5.59 6.16 6.80 7.50 8.27
other current assets 0.40 0.39 0.43 0.47 0.52 0.58 0.64
total current assets 12.10 13.64 15.05 16.60 18.31 20.19 22.27
Gross fixed assets 16.70 18.71 20.64 22.76 25.11 27.69 30.54
accumulated depreciation (2.50) (3.55) (4.70) (5.98) (7.38) (8.93) (10.64)
net fixed assets 14.20 15.16 15.93 16.78 17.72 18.76 19.90
other assets 0.10 0.10 0.10 0.10 0.10 0.10 0.10
total assets 26.40 28.90 31.08 33.48 36.13 39.05 42.27
Err:523 (1.73) (3.08) (4.31) (5.69) (7.26) (9.05)
accounts payable 4.60 5.46 6.02 6.64 7.32 8.08 8.91
other current liabilities 2.30 2.73 3.01 3.32 3.66 4.04 4.45
tot current liabilities Err:523 6.45 5.95 5.65 5.29 4.85 4.31
old long term debt 9.80 7.43 7.23 6.73 6.23 5.73 5.23
new long term debt 0.00 0.00 0.00 0.00 0.00 0.00
deffered taxes 1.30 1.60 1.93 2.29 2.69 3.13 3.62
total liabilities Err:523 15.48 15.11 14.67 14.21 13.72 13.16
common stock 0.20 1.20 1.20 1.20 1.20 1.20 1.20
paid-in-surplus 0.20 6.70 6.70 6.70 6.70 6.70 6.70
retained earnings 3.20 5.52 8.07 10.89 13.99 17.42 21.20
tot liabilities and equity Err:523 28.90 31.07 33.45 36.11 39.04 42.26
notes payable
(or excess cash)
Exhibit 5Projected
1997 1998 1999 2000 2001 2002EBIT 3.45 3.81 4.20 4.64 5.11 5.64 taxes 1.17 1.30 1.43 1.58 1.74 1.92
earnings before interest 2.28 2.51 2.77 3.06 3.37 3.72 plus depreciation 1.03 1.14 1.26 1.38 1.53 1.68 less: capital expenditures (1.72) (1.90) (2.09) (2.31) (2.55) (2.81)less:add to net work cap (0.17) (0.55) (0.61) (0.67) (0.74) (0.82)free cash flow 1.42 1.20 1.33 1.46 1.61 1.78
yearGrowth rate : free cash flow for 2003 1.86PV = 1.42 2004 1.94FV = 1.77 2005 2.03number of year 5growth rate (financial calculator) = 4,50%
Required return = risk free rate + inflation expectation + risk premium = 5,70 % + 4 % + (9.86 %-5,70%) = 13,86 % = 14 % (round up)
To evaluate the $ 9 per shares
Year shares FC/shares PVIF (14%,PV1997 1420000 1066333 1.33 0.877 1.171998 1200000 1066333 1.13 0.769 0.871999 1320000 1066333 1.24 0.675 0.842000 1460000 1066333 1.37 0.592 0.812001 1620000 1066333 1.52 0.519 0.792002 1770000 1066333 1.66 0.456 0.76
Total Present Value 5.22
Cash flow 2003 to eternity Po + 5.22 = 9+5.22 = $ 14.22
free cash flow
free cashflow
Exhibit 1
ALTERNATIVE 1Issue eight-year senior notes with warrants coupon rate 13%.
Theoritical value of a warrant TNW = (Po - E) X N
Po= $9E = $1N = 4( 1 warrant=2stock)
TNW = ($9-$1)X4 = $16
Po $9TNW 32
10000amount from warrant 320000cash from notes 7500000
-52000total amount that Rosario receive 7768000
ALTERNATIVE 2Issue stock through local investment bank by Initial Public Offering (IPO) at $9 per share.
Shares price $ 9 $ 905,798.00 $ 8,152,182.00 $ 652,174.56 number of shares 905,798 cost of investment banker $ 8,152,182.00 x 8% = $ 652,174.56 total amount that rosario receive $ 8.152.182 - $ 652.174,56= $ 7.500.007,44
ALTERNATIVE 3Issue eight-year senior notes Convertible bonds with coupon rate 13%.
Convertion ratio I bond = 60 shares common stockConvertion price 1000/50 16.67 or $ 17
Year payment PVIF 14%,t PV1 to 8 year 130 4.968 645.848 1000 0.351 351
996.84The value $ 996,84 is the minimum price at which the convertible bond is expected to sell
market price stock Conversion value9 $540
10 $60015 $900
16.67 $1,000 (par value)20 $1,20025 $1,50030 $1,800
when the current market pershare exceeds $17 conversion value exceeds $1000 par value, because the straight bond value is $996,84 the bond will still sale at $996,84
total amount that Rosario achieve is $ 7,500,000
Number ofwarrants (40000/4)
less consultant fee toMr Martinez
$ 7,500,007.44