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Cline Perfumes and Ocane Beauty Emporium: Two fashion icons merge. Cline Perfumes is a Paris based company which produces Allure, one of the most popular French perfumes used by trendy fashion models that frequent the runways of haute couture in the fashion industry. At the present moment, Cline Perfumes has recently met with Ocane Du Bois, a successful entrepreneur who has established a successful chain of exclusive fashion boutiques called Ocane Beauty Emporium. During their conversation, Ocane indicated that she is keen to sell her business as she is moving to London. She asked Cline Perfumes Managing Director if he would like to purchase her business. After discussing the matter with his board of directors, Cline Perfumes managing director asked Ocane if he could look at Ocane Beauty Emporiums audited figures. He intended to utilise the figures (as detailed in table 1 and 2 below) to calculate the enterprise value (EV) for Ocane Beauty Emporium.

Calculate the enterprise value (EV), (using the discounted cash flow method) for Ocane Beauty Emporium. Show all of your workings, as these are included in the mark allocation.

TABLE 1: FORECAST FINANCIAL DATA FOR 0CEANE BEAUTY EMPORIUM Year 0 Year 1 Year 2 Year 3Year4 Year 5 Revenues (euros) COGS Gross Profit Selling, General and Admin expenses Depreciation EBIT - Taxes NOPAT 13 328 14 395 15 546 16 790 18 13319 584 9973 8160 2901 1000 7917 10771 8813 3133 1000 4679 1030 3650 6478 6996 2487 1000 3508 772 2737 7555 1000 1000 3869 851 3019 3174 937 2476 3322 TABLE 2 ADDITIONAL INFORMATION FOR OCEANE BEAUTY EMPORIUM Net working capital (as an percentage of sales) Steady State growth Weighted average cost of Capital Year 0 Net PPE Tax rate SG&A Capital expenditure per year 2896 59% 11,0% E 10000 22% 1696 2 000

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