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Following are financial statement information for Westlands Corporation , an NSE listed company:
2017 2018
sales growth 8.5% 10.65%
Net profit margin 6.71% 8.22%
net working capital turnover 8.98 9.33
fixed asset turnover 1.96 1.64
total operation assets/total equity 1.96 2.01
number of shares outstanding 1,737 1,733
sales 25,423 28,131
net income 1,706 2,312
net working capital 2,832 17, 136
fixed assets 15, 232 17,136
total operating assets 18,064 20,156
long term liabilities 8,832 10,132
total shareholders equity 9,232 10,019
using the residual income model, prepare a valuation of the equity of Westlands Corporation as of 2018 under the following assumptions:
i) forecast horizon of five years
ii) Sales growth of 10.65% per year over the forecast horizon and 3.5% thereafter.
iii) all financial ratios remain at year 3 levels
iv) cost of equity is 12.5%
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