A Company's performance will have an impact on its Valuation. Based on following information prepare a sensitive table on how changes in sales affects the Company's Enterprise Valuation : Amount (INR Crore) Percentage Sa

Answer 2A(iii)(ii) Sensitivity Table (Sales increases by 10%): Sensitivity Table Present Sale increases by 10% Sale decreases by 10% Sales (Cr) 1000 1100 900 Cost of Sales (Cr) 700 770 630 Gross Profit (Cr) 300 330 270 Fixed Cost (Constant up to ₹ 2000 Cr of Sales) (Cr) 150 150 150 Variable Cost (10% on Sales) (Cr) 100 110 90 Earnings before Tax (EBT) (Cr) 50 70 30 Tax (25% of EBT) (Cr) 12.50 17.50 7.50 Earning after Tax 37.50 52.50 22.50 EPS (in Rs.) 25 35 15 P/E ratio of the industry 20 20 20 Market Price per Share 500 700 300 Enterprise Value 7,50,00,00,000 10,50,00,00,000 4,50,00,00,000 Change in Market Value per Share 200 -200 Market change (%) 40% -40% Change in Enterprise Value 3,00,00,00,000 -3,00,00,00,000 Change in % 40% -40% Calculations for 10% Sales Increase: New Sales = 1000 * 1.10 = 1100 Cr New Cost of Sales = 70% of 1100 = 770 Cr New Gross Profit = 1100 - 770 = 330 Cr Fixed Cost = 150 Cr (constant) New Variable Cost = 10% of 1100 = 110 Cr New EBT = Gross Profit - Fixed Cost - Variable Cost = 330 - 150 - 110 = 70 Cr New Tax = 25% of 70 = 17.50 Cr New Earning after Tax = 70 - 17.50 = 52.50 Cr New EPS = 52.50 / 1.5 Cr shares = ₹35 New Market Price per Share = 35 * 20 = ₹700 New Enterprise Value = 700 * 1,50,00,000 = ₹10,50,00,00,000 Opinion: A 10% increase in sales leads to a 40% increase in Market Price per Share (from ₹500 to ₹700) and Enterprise Value (from ₹7,500 crore to ₹10,500 crore). This indicates a high sensitivity of the company's valuation to sales changes, suggesting strong operational leverage.