Corporate Finance Project

Professor Elsayeda Ismail

Prepared By
Ahmed Abd Elmoneim Nasr
 Balance Sheets 2017-2021
                         
2017 2018 2019 2020 2021   2017 2018 2019 2020 2021
Period Ending: Period Ending:
30-Jun 30-Jun 30-Jun 30-Jun 30-Jun   30-Jun 30-Jun 30-Jun 30-Jun 30-Jun
Total Current Assets 5166.49 6120.51 7589.16 7643.73 8043.56   Total Current Liabilities 2019.49 2563.21 2382.08 2089.76 2149.62
Cash and Short Term
3858.52 4587.92 5933.44 6069.61 7225.48   Accounts Payable 719.75 657.26 484.25 483.9 455.69
Investments
Cash 0.27 0.29 0.34 0.39 0.19   Payable/Accrued 0 0 0 0 0
Cash & Equivalents 1137.20 830.72 402.79 587.5 625.44   Accrued Expenses 0 0 0 0 0
Notes Payable/Short Term
Short Term Investments 2721.05 3756.91 5530.31 5481.72 6599.85   37.86 22.18 17.18 17.18 0
Debt
Current Port. of LT
Total Receivables, Net 331.95 441.78 414.3 258.57 579.4   48.56 48.11 45.08 25.61 0.05
Debt/Capital Leases
Accounts Receivables - Trade, Other Current liabilities,
124.75 160.13 78.91 77.47 160.84   1213.32 1835.66 1835.57 1563.07 1693.88
Net Total
Total Inventory 966.57 1075.45 1216.61 1276.05 1282.39   Total Liabilities 2582.14 2988.99 2797.77 2511.91 2487.24
Prepaid Expenses 9.44 15.36 24.81 37.33 36.3  
Total Long Term Debt 125.76 76.45 26.55 0.05 0
Other Current Assets, Total 0.00 0.00 0.00 2.16 0  
10847.8
Total Assets 6748.48 7870.6 9056.19 9311.64   Capital Lease Obligations 0 0 0 0 0
4
Property/Plant/Equipment, Total - Net 931.71 1082.82 1143.53 1334.41 1383.3   Deferred Income Tax 222.43 72.48 79.34 119.15 121.67
Property/Plant/Equipment, Total - Gross 3192.11 3411.02 3562.92 3794.84 3951.72   Minority Interest 0 0 0 0 0
Accumulated Depreciation, Total -2260.4 -2328.2 -2419.39 -2460.43 -2568.42   Other Liabilities, Total 214.46 276.86 309.8 302.95 215.95
Goodwill, Net 0 0 0 0 0   Total Equity 4166.36 4881.61 6258.42 6799.73 8360.6
Intangibles, Net 0 0 0 0 0   Redeemable Preferred Stock, Total 0 0 0 0 0
Preferred Stock - Non
Long Term Investments 650.27 667.27 323.5 333.5 340.98   0 0 0 0 0
Redeemable, Net
Note Receivable - Long Term 0 0 0 0 0   Common Stock, Total 1892.81 1892.81 1892.81 1892.81 1892.81
Other Long Term Assets, Total 0 0 0 0 0   Additional Paid-In Capital 0 0 0 0 0
Retained Earnings (Accumulated
Other Assets, Total 0 0 0 0 0   Deficit)
2273.55 2988.8 4365.61 4906.92 6467.79
              Treasury Stock - Common 0 0 0 0 0
              Unrealized Gain (Loss) 0 0 0 0 0
Total Liabilities &
              6748.5 7870.6 9056.19 9311.64 10847.84
Shareholders' Equity
Total Common Shares
              1261.88 1261.88 1261.88 1261.88 1261.88
Outstanding
Income Statements 2017-2021
           
Period Ending: 2017 2018 2019 2020 2021
 30-Jun 30-Jun 30-Jun 30-Jun 30-Jun
Total Revenue 6021.58 7552.98 8584.53 7881.74 8839.41
Revenue 6021.58 7552.98 8584.53 7881.74 8839.41
Other Revenue, Total 0 0 0 0 0
Cost of Revenue, Total 3961.28 4878.67 5144.06 4997.39 4932.57
Gross Profit 2060.3 2674.31 3440.47 2884.35 3906.84
Total Operating Expenses 4359.63 5367.19 5750.83 5560.65 5498.36
Selling/General/Admin. Expenses, Total 391.69 481.01 541.85 539.68 559.01
Research & Development 0 0 0 0 0
Depreciation / Amortization 7.74 8.33 8.47 11.37 11.12
Interest Expense (Income) - Net Operating 0 0 0 0 0
Unusual Expense (Income) -1 -1 0 0 0
Other Operating Expenses, Total 0 0.18 56.45 12.21 -4.35
Operating Income 1661.95 2185.79 2833.7 2321.08 3845.06
Interest Income (Expense), Net Non-Operating 1143.89 787.95 1176.45 948.43 819.10
Gain (Loss) on Sale of Assets 3.01 1.14 2.72 1.08 12.24
Other, Net 30.55 37.54 52.2 138.08 145.65
Net Income Before Taxes 2839.4 3012.41 4065.06 3408.68 4318.1
Provision for Income Taxes 601.13 592.4 907.93 713.8 802.09
Net Income After Taxes 2238.27 2420.02 3157.13 2694.89 3516.01
Minority Interest 0 0 0 0 0
Equity In Affiliates 0 0 0 0 0
U.S GAAP Adjustment 0 0 0 0 0
Net Income Before Extraordinary Items 2238.27 2420.02 3157.13 2694.89 3516.01
Total Extraordinary Items   - - - -
Net Income 2238.27 2420.02 3157.13 2694.89 3516.01
Total Adjustments to Net Income 0 0 0 0 0
Income Available to Common Excluding Extraordinary Items 2238.27 2420.02 3157.13 2694.89 3516.01
Dilution Adjustment 0 0 0 0 0
Diluted Net Income 2238.27 2420.02 3157.13 2694.89 3516.01
Diluted Weighted Average Shares 1261.87 1261.88 1261.88 1261.88 1261.88
Diluted EPS Excluding Extraordinary Items 1.77 1.92 2.5 2.14 2.79
DPS - Common Stock Primary Issue 1.05 1.1 1.3 1.2 1.3
Diluted Normalized EPS 1.77 1.92 2.5 2.13 2.78

Financial Cash Flow Statement 2021

 Cash Flow From Assets (CFFA) =
The free cash Flow Of The Company 2774.13 Cash Flow From Creditors And Stockholders = 2774.15
Operating Cash Flow (OCF) 3054.09 Cash Flow To Creditors (CF.CR) (Bondsholders) 819.2
EBIT 3845.06
Interest Paid 819.10
Depreciation 11.12
( Taxes ) 802.09 (Net New Borrowing) -0.05
   
Net Capital Spending 60.01 Ending Long Term Debt 0

Ending Fixed Assets 1383.3

(Beginning Long Term Debt ) 0.05
( Beginning Fixed Assets ) 1334.41
Depreciation 11.12    

   
Cash Flow To Stockholders (CF.SH) (Owners) 1955
Change In Net Working Capital (NWC) 339.97

* Ending NWC (2021) 5893.94 Dividends Paid 1955

(CA) 8043.56
(Net New Equity Raised ) 0
Current Liab .(CL) 2149.62

* (Beginning NWC) ( 2020) 5553.97

Ending Common Stock APIC & Treasury Stock 0
(CA) 7643.73
2089.76 (Beginning Common Stock APIC & Treasury Stock) 0
Current Liab .(CL)

Comment :
The total cash flow from assets is $ 2774.15 which is composed of $ 819.2 given to creditors and $1955 to stockholders.
The statement of cash flows contains three sections: cash flows from operating activities, investing activities and financing activities. Each
of these sections gives us useful information about an entity’s performance.
Operating activities :
 This shows how much cash the business can generate from its core activities, In this firm we saw that the firm has $ 3054.09 that
is greater than previous years because The price of fertilisers has increased by 36.7 % for one ton.
 Abu Qir Fertlizers has positive cash generated from operations, and in the same time there is decreasing in the Acc.Payable
compared with previous years , it may be that the company is accelerate paying its suppliers (not delaying paying in order to
improve its cash flow position at the end of the year).
Investing activities :
 This section of the statement of cash flows focuses on the cash flows relating to non-current assets as we see it 's small number .
Here sales of assets not be used to finance the operating side of the business or to pay dividends. This is poor cash management,
as a company will not be able to continue selling assets in order to survive. This is an indication that a company is shrinking and not
growing.
Financing activities :
 The sources of financing any increases in assets should also be considered. If this can be financed out of operations ,This is the best
scenario as it shows the company is generating significant levels of surplus cash.
 2017 2018 2019 2020 2021 Industry
 
Ratios Ratios Ratios Ratios Ratios Average

Short Term Solvency Or Liquidity Ratios

Current ratio 2.56 2.39 3.19 3.66 3.74 1.83
4.00

Current Assets $ 5,166 $ 6,121 $ 7,589 $ 7,644 $ 8,044   3.50

Current Liabilities $ 2,019 $ 2,563 $ 2,382 $ 2,090 $ 2,150   3.00

2.50
Quick ratio 2.08 1.97 2.68 3.05 3.15 1.46
2.00

Current Assets - INV. $ 4,200 $ 5,045 $ 6,373 $ 6,368 $ 6,761   1.50

Current Liabilities $ 2,019 $ 2,563 $ 2,382 $ 2,090 $ 2,150   1.00

0.50
Cash ratio 0.56 0.32 0.17 0.28 0.29 0.21
0.00
1 2 3 4 5
Cash $ 1,137 $ 831 $ 403 $ 576 $ 626  
Series1 Series2 Series3

Current Liabilities $ 2,019 $ 2,563 $ 2,382 $ 2,090 $ 2,150  

Current ratio 2021 :

A current ratio of 3.74 would indicate that the company has $3.74 of current assets for every $1.00 of current liabilities. which is a good
sign , and also comparing to industry average .
Quick ratio 2021 :
Is more than the average (Approximately the double )which shows that the firm is able to cover its short term liabilities .
Cash ratio :
Cash ratio is greater than the average which shows that the firm can cover its short term liability fast using cash which means that the
firm can cover 0.29 times.
 Inventory turnover 4.10 4.54 4.23 3.92 3.85
Asset management or turnover ratio
Cost Of Good Sold $ 3,961 $ 4,879 $ 5,144 $ 4,997 $ 4,933
5.00

Inventory $ 967 $ 1,075 $ 1,217 $ 1,276 $ 1,282 4.50

Receivables turnover 48.27 47.17 108.79 101.74 54.96 47.98

4.00

Sales $ 6,022 $ 7,553 $ 8,585 $ 7,882 $ 8,839 3.50

3.00
Acc. Receivable $ 125 $ 160 $ 79 $ 77 $ 161
2.50
Total asset turnover 0.89 0.96 0.95 0.85 0.81
2.00
Sales $ 6,022 $ 7,553 $ 8,585 $ 7,882 $ 8,839
1.50

Total Assets $ 6,748 $ 7,871 $ 9,056 $ 9,312 $ 10,848 1.00

AP Turnover 2.95 2.92 3.71 3.40 3.61 0.50

0.00
Cost Of Good Sold $ 3,961 $ 4,879 $ 5,144 $ 4,997 $ 4,933   1 2 3 4 5

A.P $ 1,342 $ 1,668 $ 1,386 $ 1,470 $ 1,365   Inventory turnover AP Turnover

Total asset turnover

Inventory turnover:
Meant that the firm turned over or sold off the entire inventory 3.85 times which showed that the firm can efficiently manage the
inventory .
Receivables turnover :
Meant that the firm collected our outstanding credit accounts and lent the money again 54.9 times during the year which is greater than
the average which show that the firm is in a good situation .
Total asset turnover :
Is the same with the average. It meant that for every 1 dollar in assets, we generated 1.0 in sales this shows that the firm is able to
manage its assets efficiently
 Total debt ratio -0.23 -0.24 -0.38 -0.46 -0.54 0.20
Financial leverage ratio
$ $ $ $ $
Total Liab - Total Equity   2.00
(1,584) (1,893) (3,461) (4,288) (5,873)
$ $ $ $ $
Total Assets   1.50
6,748 7,871 9,056 9,312 10,848
Debt-equity ratio -0.38 -0.39 -0.55 -0.63 -0.70 0.13
1.00
$ $ $ $ $
Total Liab - Total Equity  
(1,584) (1,893) (3,461) (4,288) (5,873) 0.50
$ $ $ $ $
Total Equity  
4,166 4,882 6,258 6,800 8,361 0.00
1 2 3 4 5
Equity multiplier 1.62 1.61 1.45 1.37 1.30 1.46
(0.50)
$ $ $ $ $
TA Or D  
6,748 7,871 9,056 9,312 10,848
(1.00)
$ $ $ $ $
TE E  
4,166 4,882 6,258 6,800 8,361 Total debt ratio Debt-equity ratio Equity multiplier
Times interest earned 1.45 2.77 2.41 2.45 4.69 2.9
$ $ $ $ $ Financial leverage ratio
EBIT  
1,662 2,186 2,834 2,321 3,845 10.00

Interest   8.00
1,144 788 1,176 948 819
6.00
Cash coverage ratio 3.45 5.72 4.46 5.04 7.83 4.8 4.00
$ $ $ $ $ 2.00
EBIT + Dep.  
3,951 4,504 5,253 4,781 6,412
0.00
1 2 3 4 5
Interest  
1,144 788 1,176 948 819
Times interest earned Cash coverage ratio

Total debt ratio :

The ratio is 0.54 most of the company’s assets are financed through debt. Companies with high debt/asset ratios are said to be “highly leveraged,” could be in
danger if creditors start to demand repayment of debt.
Times interest earned :
Means that the interest bill is covered 4.96 times. TIE greater than average TIE which is a good sign and shows that the firm is able to get loans with low
interest and its incapability to pay its loans from the main operations.
Cash coverage :
Cash coverage is greater than the average , which is a good sign and shows that the firm is able to get loans with low interest its incapability to pay its loans
from the main operations
 Profit margin 0.70 0.32 0.37 0.34 0.40 0.4

$ $ $ $ $ Profitability
Net Income  
4,200 2,420 3,157 2,695 3,516
1.20

$ $ $ $ $
Sales  
6,022 7,553 8,585 7,882 8,839 1.00

Return on assets 0.62 0.31 0.35 0.29 0.32 0.31 0.80

$ $ $ $ $ 0.60
Net Income  
4,200 2,420 3,157 2,695 3,516

0.40
$ $ $ $ $
Total Assets  
6,748 7,871 9,056 9,312 10,848
0.20
Return on equity 1.01 0.50 0.50 0.40 0.42 0.4
0.00
1 2 3 4 5
$ $ $ $ $
Net Income  
4,200 2,420 3,157 2,695 3,516 Profit margin Return on assets
Return on equity
$ $ $ $ $
Total Equity  
4,166 4,882 6,258 6,800 8,361

Profit margin :
Means that the company generates 40% in net income for every 1 dollar that is equal with the average which shows the firm’s ability to compete well and
achieve high ratios from its sales.
ROA :
ROA is greater than the average which shows that the firm can get 32 % of net income for every dollar invested in Total assets .Also it shows that the firm
increased its efficiency in managing assets.
ROE :
ROE is greater than average which show that the firm get 42% from revenues from every dollar spent on equity (stockholders).

Chapter Case # 1: Sun Star Hotel .

Q1 What are the market values of the individual capital components?
Sun Star Hotel
Year 0 1 2 3 4 5 6 7 8 9 10

Cost in EGP -70,000,000 -23800000 -24990000 -26239000 -27551000 -28929000 -30375000 -31894000 -33489000 -35163000 -36922000
Reveue in Total
0 20825000 23949000 27541000 31672000 36423000 41887000 48169000 55395000 63704000 73259000
EGP
Net Cash
-70,000,000 -2,975,000 -1,041,000 1,302,000 4,121,000 7,494,000 11,512,000 16,275,000 21,906,000 28,541,000 36,337,000
Flow
r 1 1.15 1.32 1.52 1.75 2.01 2.31 2.66 3.06 3.52 4.05

NPV -70,000,000 -2,586,957 -787,146 856,086 2,356,195 3,725,842 4,976,955 6,118,375 7,161,110 8,113,134 8,981,951 -31,084,453

The net present value is negative ( 31084453 ) which mean that the company did not achieve the initial so we will reject the project

Q2 Determine the Internal Rate of Return IRR for project .

By Using Financial Calculator : IRR = 7.076% less than the discount rate , So we will reject the project
Year 0 1 2 3 4 5 6 7 8 9 10

Net Cash
70,000,000 -2975000 -1041000 1302000 4121000 7494000 11512000 16275000 21906000 28541000 36337000
Flow

Q3 Determine the simple Payback for project if the cut off time is 5 years
The company achieved the initial cost by using payback method in 8.4 years (>5) , so the company fail in that , the project reject
Year 0 1 2 3 4 5 6 7 8 9 10
Net Cash
70,000,000 -2975000 -1041000 1302000 4121000 7494000 11512000 16275000 21906000 28541000 36337000
Flow
Payback
70,000,000 72975000 74016000 72714000 68593000 61099000 49587000. 33312000 11406000. -17135000
Period  

Q4 Determine the discount Payback for project if the cut off time is 5 years.
 The company during life cycle fail to achieved the initial cost payback
Year 0 1 2 3 4 5 6 7 8 9 10

NPV -70,000,000 -2,586,957 -787,146 856,086 2,356,195 3,725,842 4,976,955 6,118,375 7,161,110 8,113,134 8,981,951

  70,000,000 72,586,957 73,374,102 72,518,016 70,161,821 66,435,978 61,459,023 55,340,648 48,179,537 40,066,404 31,084,453

Q5 Determine the profitability Index for project.

Profitability Index =
NPV / Initial investment = 0.56 , less than 1 ,so the project reject
  NPV 38915546.67
    70000000
Profitability index = NPV /Initial investment 0.56

Chapter case # 2 : Turkiye Fasmostik Group

Q1 what are the market values of the individual capital components?
  No. of share 4.25 Price 38.2  
 Market value for Comman stock = No. of share * Price = 162.35 Milion
  No. of share 1.85 Price 27.5  
Market value for Prefered stock = No. of share * Price = 50.875 Milion
Market Value
Bond A B C D For Bonds
Nominal Value 5,000,000.00 11,500,000.00 13,800,000.00 15,200,000.00  
Maket price % 103.14 102.59 99.83 93.63  

Market value 5,157,000.00 11,797,850.00 13,776,540.00 14,231,760.00 44,963,150.00

Q2 What are the TFG capital structure weight ?

Capital Market value Weight %
Common Stoke- WE 162,350,000.00 0.629
Prefeered stock-WP 50,875,000.00 0.197
Bond -WD 44,963,150.00 0.174
Total Capital price 258,188,150.00 1

Q3 What are the cost of Common stock if using dividend growth rate 5%?
Q4 what are the cost of preferred stock?
D1 (1.68(1+0.05)) 1.764 P0 38.2 g 0.05
      RE = (D1/P0)+g = 0.09617801    
D 2.65 P0 27.5 g 0.05
      Rp = (D/P0) = 0.096363636  

Q5 what is the weight average pretax cost of debt?

Nominal Market Market Debt Maket
B Coupon rate Freq Maturtity YTM RD
Value price % Value weight price
A 5,000,000 103.14 5,157,000 0.115 9.25 Annual 3 8.031 0.921 1031.4
B 11,500,000 102.59 11,797,850 0.262 8.75 Annual 5 8.1 2.125 1025.9
C 13,800,000 99.83 13,776,540 0.306 8.25 Semi-annu 7.5 8.281 2.537 998.3
D 15,200,000 93.63 14,231,760 0.317 7.5 Semi-annu 12 8.351 2.643 936.3
Total Bond price 44,963,150 1 Average debt requied rate 8.226

Q6 what is the weight average after tax cost of debt? If tax was 34%?
(1-0.34) 0.66 Rd before tax 8.226990491
The RD aftertax = Rd before tax (1-0.34) 5.43  

Q7 What is TFG WACC?

Capital Market value Weight % Rate Of Return  

Common Stoke- WE 162,350,000.00 0.629 0.096 0.060
Prefeered stock-WP 50,875,000.00 0.197 0.096 0.019
Bond -WD 44,963,150.00 0.174 0.054 0.009
Total Capital price 258,188,150.00 1 WACC 8.89%
WACC = WE * RE + WP * RP + WD *RD after tax

Q8 Calculate the cost of common stock by CAPM ?

RF = 6.25 Beta 0.7 Market Return 14.85
  RE = RF + ß(E(RM)-RF) 12.27  
Capital Market value Weight % Rate of return  
Common Stoke- WE 162,350,000.00 0.629 0.12 0.077
Prefeered stock-WP 50,875,000.00 0.197 0.096 0.019
Bond -WD 44,963,150.00 0.174 0.054 0.009
Total Capital price 258,188,150.00 1 WACC 10.56%