Company Valuation Under IFRS : Interpreting and Forecasting ...

Company valuation under IFRS
Furthermore let us assume that the company is going to run with no debt and no
cash in the balance sheet. So dividends each year must equal the cash flow after
capital expenditure and change in working capital (free cash flow). Exhibit 1.1
illustrates the profit and loss account, cash flow statement, and balance sheets for
Constant company.
Exhibit 1.1: Constant growth company accounts
Profit and loss account
Year 0 1 2 3 4 5
Profit and loss account
Sales 1,000 1,050 1,103 1,158 1,216
Operating costs (750) (788) (827) (868) (912)
Profit 250 263 276 289 304
Tax (100) (105) (110) (116) (122)
Earnings 150 158 165 174 182
Balance sheet
Year 0 1 2 3 4 5
Balance sheet
Fixed assets 1,000 1,060 1,123 1,189 1,259 1,332
Working capital 500 515 531 547 565 583
Total assets 1,500 1,575 1,654 1,736 1,823 1,914
Equity 1,500 1,575 1,654 1,736 1,823 1,914
Cash flow
Year 0 1 2 3 4 5
Cash flow
Earnings 150 158 165 174 182
Depreciation 100 106 112 119 126
Cash flow from operations 250 264 278 293 308
Capital expenditure (160) (169) (178) (188) (199)
Change in working capital (15) (16) (17) (17) (18)
Dividend (=free cashflow) (75) (79) (83) (87) (91)
Net cash flow 0 0 0 0 0
4