BFN352 - 03 Problem set

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University of Prince Edward Island *

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BFN352

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Finance

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Jan 9, 2024

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xlsx

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42

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a) What is the value per share for Joe&Bob Inc. if there are 2.0 million outstandin b) If your estimate of FCFE over the last year is 6.2 M$, what constant growth rat a) Show the calculations needed to go from Net Income to FCFF. b) Show the calculations needed to go from Net Income to FCFE. c) Show the calculations needed to go from FCFF to FCFE. d) Show the calculations needed to go from CFO to FCFF. e) Show the calculations needed to go from CFO to FCFE. f) Show the calculations needed to go from EBIT to FCFF. g) Show the calculations needed to go from EBIT to FCFE. h) Show the calculations needed to go from EBITDA to FCFF. 03.1 - After carefully analysing their last financial statements, you estimate that Jo it should continue to grow (forever) at 5%. Their cost of debt was 5.7% before tax equity of 11.8%. The company expects to maintain its target capital structure of 2 rate is currently 33.33%. They have issued bonds for a total face value of 30.0 M$ interest rates. (all % are per year) 03.2 - Answer the following questions using the financial statements from Cool Ki
i) Show the calculations needed to go from EBITDA to FCFE. a) What is the value per share for CompuStuff Inc. if there are 2.0 million outstan a) What is the (equity) value of the company based on your analysis? b) How robust is your valuation to a change in plus or minus 0.5% in the long-ter c) If the current market capitalisation is 58.3 M$, is the stock over, fairly or under 03.3 - Answer the same questions as 03.2 but now using the financial statements 03.4 - After carefully analysing their last financial statements, you estimate that C that it should continue to grow (forever) at 7.3%. Their cost of debt was 6.7% bef capital structure of 30% debt and 70% common equity. Their corporate tax rate i high at 10% because of poorly controlled inflation. The equity risk premium on th the company based on the past 5 years of monthly returns. (all % are per year) b) Sensitivity analysis : What is the range of plausible share prices if you actu 03.5 - The company FluffyPillows Inc. has sold 30 M$ worth of their unicorn-them 10%, their Net Income was 3 M$. Due to the current popularity of unicorns, you more reasonable 6% after that. Because the company will improve its manufactu gradually increase by 1% until it reaches 15% in 5 years. You think that the invest Dep) will represent 8% of sales and the required increase in working capital will b be financed by new debt. Using the CAPM, you estimate that the required rate o
a) What is the appropriate discount rate for the FCFF? b) What is the (equity) value per share if the FCFF continue to grow at 4% forever c) What is the increase in value per share compared to b) if the FCFF grow first a d) What is the increase in value per share compared to b) if the FCFF grow first a 03.6 - After carefully analysing their last financial statements, you estimate that H of debt was 5.2% before taxes. The company expects to soon reach its target cap corporate tax rate is currently 35%. The risk-free rate is 1% and the expected retu for the company based on the past 5 years of monthly returns. The market value 100 000 common shares outstanding. (all relevant % are per year)
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ng common shares? te for FCFE would be coherent with the valuation you've found in a)? oe&Bob Inc. had FCFF of 7.0 M$ over the last year and that xes and using the CAPM you've found a required return on 20% debt and 80% common equity. Their corporate tax $ and they are worth 22.0 M$ given the current level of ids Toyzz Inc. (in a separate Excel sheet).
nding common shares? rm growth rate of sales? rvalued? s from Big-B Machines Inc. (in a separate Excel sheet). CompuStuff Inc. had FCFE of 12.3 M$ over the last year and fore taxes. The company expects to maintain its target is currently 35%. The risk-free rate in this country is very his market is 5.5% and you have measured a beta of 1.0 for ually think that the FCFE growth could be between 5% and 9% and also that the company's beta could b med pillows over the last year. With a net profit margin of expect sales to grow at 20% for 3 years before settling for a uring efficiency, you also expect the profit margin to tment in fixed capital needed net of depreciation (FCInv- be about 4% of sales. Half of these increases in capital will of return is 12.4%. (all relevant % are per year)
r? 10% for 8 years and then at 4% forever? a 10% for 4 years, 7% for the following 4 years and then at 4% forever? HWP Inc. had FCFF of 2.3 M$ over the last year. Their cost pital structure of 30% debt and 70% common equity. Their urn for the market is 6%. You have measured a beta of 1.2 e of the company's debt is currently 10 M$ and there are
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be between 0.75 and 1.25?
Cool Kids Toyzz Inc Balance Sheet (in M$) 2019 2020 Assets Current assets Cash and equivalents 210 248 Accounts receivable 474 513 Inventory 520 564 Total Current assets 1204 1325 Gross fixed assets 2501 2850 Accumulated depreciation -604 -784 Net fixed assets 1897 2066 Total Assets 3101 3391 Liabilities and shareholders' equity Current liabilities Accounts payable 295 317 Notes payable 300 310 Accrued taxes and expenses 76 99 Total current liabilities 671 726 Long-term debt 1010 1050 Common stock 50 50 Additional paid-in capital 300 300 Retained earnings 1070 1265 Total shareholder's equity 1420 1615 Total liabilities and shareholders' equity 3101 3391 Statement of Income (in M$) 2020 Total revenues 2215 Opearting costs and expenses 1430 EBITDA 785 Depreciation 180 EBIT 605
Interest expense 130 Income before tax 475 Taxes (at 40%) 190 Net income 285 Dividends 90 Addition to retained earnings 195 Statement of Cash Flows (in M$) 2020 Operating activities Net income 285 Adjustments Depreciation 180 Changes in working capital Accounts receivable -39 Inventories -44 Accounts payable 22 Accrued taxes and expenses 23 Cash provided by operating activities 427 Investing activities Purchase of fixed assets 349 Cash used for investing activities 349 Financing activities Notes payable -10 Long-term financing issuances -40 Common stock dividend 90 Cash used for financing activities 40 Cash and equivalents increase 38 Cash and equivalents at beginning of year 210 Cash and equivalents at end of year 248 Supplemental cash flow disclosures Interest paid 130 Income taxes paid 190
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Note: "cash used" means it's a cash outflow Note: "cash used" means it's a cash outflow Because of the way a statement of cash flows is usually presented, negative numbers here mean an increase in working capital and positive numbers correspond to a decrease in the amount of working capital required.
Big-B Machines Inc Balance Sheet (in M$) 2019 2020 Assets Current assets Cash and equivalents 190 200 Accounts receivable 560 600 Inventory 410 440 Total Current assets 1160 1240 Gross fixed assets 2200 2600 Accumulated depreciation -900 -1200 Net fixed assets 1300 1400 Total Assets 2460 2640 Liabilities and shareholders' equity Current liabilities Accounts payable 285 300 Notes payable 200 250 Accrued taxes and expenses 140 150 Total current liabilities 625 700 Long-term debt 865 890 Common stock 100 100 Additional paid-in capital 200 200 Retained earnings 670 750 Total shareholder's equity 970 1050 Total liabilities and shareholders' equity 2460 2640 Statement of Income (in M$) 2020 Total revenues 3000 Opearting costs and expenses 2200 EBITDA 800 Depreciation 300 EBIT 500
Interest expense 100 Income before tax 400 Taxes (at 40%) 160 Net income 240 Dividends 160 Addition to retained earnings 80 Statement of Cash Flows (in M$) 2020 Operating activities Net income 240 Adjustments Depreciation 300 Changes in working capital Accounts receivable -40 Inventories -30 Accounts payable 15 Accrued taxes and expenses 10 Cash provided by operating activities 495 Investing activities Purchase of fixed assets 400 Cash used for investing activities 400 Financing activities Notes payable -50 Long-term financing issuances -25 Common stock dividend 160 Cash used for financing activities 85 Cash and equivalents increase 10 Cash and equivalents at beginning of year 190 Cash and equivalents at end of year 200 Supplemental cash flow disclosures Interest paid 100 Income taxes paid 160
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Note: "cash used" means it's a cash outflow Note: "cash used" means it's a cash outflow Because of the way a statement of cash flows is usually presented, negative numbers here mean an increase in working capital and positive numbers correspond to a decrease in the amount of working capital required.
a) What is the value per share for Joe&Bob Inc. if there are 2.0 million outstandin Debt Pref. Sh. Comm. Sh. weight 20% 0% 0.80 cost 3.80019% 0.00 11.80% WACC 10.20004% FCFF -> growing perpetuity (like GGM) FCFF0 $ 7,000,000.00 g 5% FCFF1 $ 7,350,000.00 Firm Value $ 141,345,120.94 Debt value $ 22,000,000.00 Equity value $ 119,345,120.94 n shares 2000000 Value per share $ 59.67 Answer $ 59.67 per share b) If your estimate of FCFE over the last year is 6.2 M$, what constant growth rat FCFE0 $ 6,200,000.00 g 6.278798% FCFE1 $ 6,589,285.46 Equity Value $ 119,345,120.94 Answer 6.2788% per year 03.1 - After carefully analysing their last financial statements, you estimate that Jo it should continue to grow (forever) at 5%. Their cost of debt was 5.7% before tax equity of 11.8%. The company expects to maintain its target capital structure of 2 rate is currently 33.33%. They have issued bonds for a total face value of 30.0 M$ interest rates. (all % are per year) 03.2 - Answer the following questions using the financial statements from Cool Ki
a) Show the calculations needed to go from Net Income to FCFF. FCFF=NI+NCC+Int(1-T)+Pdiv-FCInv NI 285 T NCC 180 Depreciation is the only NCC h 40% Int(1-T) 78 Pdiv 0 No preferred shares here. -FCInv -349 That's how much was spent on -WCInv -38 Note: Accounts receivable, for FCFF= 156 M$ Answer 156 M$ b) Show the calculations needed to go from Net Income to FCFE. FCFE=NI+NCC-FCInv-WCInv+Net b NI 285 NCC 180 -FCInv -349 -WCInv -38 Net borrowing 50 Positive number because the c FCFE= 128 M$ Answer 128 M$ c) Show the calculations needed to go from FCFF to FCFE. FCFE=FCFF-Int(1-T)+Net borrowing FCFF 156 -Int(1-T) -78 Net borrowing 50 FCFE= 128 M$ FCFE is usually Answer 128 M$
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d) Show the calculations needed to go from CFO to FCFF. FCFF=CFO+Int(1-T)-FCInv CFO 427 Int(1-T) 78 -FCInv -349 FCFF= 156 M$ Answer 156 M$ e) Show the calculations needed to go from CFO to FCFE. FCFE=CFO-FCInv+Net borrowing CFO 427 -FCInv -349 Net borrowing 50 FCFE= 128 M$ Answer 128 M$ f) Show the calculations needed to go from EBIT to FCFF. FCFF=EBIT(1-T)+Dep-FCInv-WCInv T EBIT 605 40% EBIT(1-T) 363 Dep 180 -FCInv -349 -WCInv -38 FCFF= 156 M$ Answer 156 M$ g) Show the calculations needed to go from EBIT to FCFE.
Answer Just do f) then c). h) Show the calculations needed to go from EBITDA to FCFF. FCFF=EBITDA(1-T)+Dep(T)-FCInv- T EBITDA 785 40% Dep 180 EBITDA(1-T) 471 Dep(T) 72 -FCInv -349 -WCInv -38 FCFF= 156 M$ Answer 156 M$ i) Show the calculations needed to go from EBITDA to FCFE. Answer Just do h) then c). a) Show the calculations needed to go from Net Income to FCFF. FCFF=NI+NCC+Int(1-T)+Pdiv-FCInv NI 240 T NCC 300 Depreciation is the only NCC h 40% Int(1-T) 60 Pdiv 0 No preferred shares here. -FCInv -400 That's how much was spent on -WCInv -45 FCFF= 155 M$ Answer 155 M$ b) Show the calculations needed to go from Net Income to FCFE. 03.3 - Answer the following questions using the financial statements from Big-B M
FCFE=NI+NCC-FCInv-WCInv+Net b NI 240 NCC 300 -FCInv -400 -WCInv -45 Net borrowing 75 Positive number because the c FCFE= 170 M$ Answer 170 M$ c) Show the calculations needed to go from FCFF to FCFE. FCFE=FCFF-Int(1-T)+Net borrowing FCFF 155 -Int(1-T) -60 Net borrowing 75 FCFE= 170 M$ FCFE is usually Answer 170 M$ d) Show the calculations needed to go from CFO to FCFF. FCFF=CFO+Int(1-T)-FCInv CFO 495 Int(1-T) 60 -FCInv -400 FCFF= 155 M$ Answer 155 M$ e) Show the calculations needed to go from CFO to FCFE. FCFE=CFO-FCInv+Net borrowing
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CFO 495 -FCInv -400 Net borrowing 75 FCFE= 170 M$ Answer 170 M$ f) Show the calculations needed to go from EBIT to FCFF. FCFF=EBIT(1-T)+Dep-FCInv-WCInv T EBIT 500 40% EBIT(1-T) 300 Dep 300 -FCInv -400 -WCInv -45 FCFF= 155 M$ Answer 155 M$ g) Show the calculations needed to go from EBIT to FCFE. Answer Just do f) then c). h) Show the calculations needed to go from EBITDA to FCFF. FCFF=EBITDA(1-T)+Dep(T)-FCInv- T EBITDA 800 40% Dep 300 EBITDA(1-T) 480 Dep(T) 120 -FCInv -400 -WCInv -45 FCFF= 155 M$ Answer 155 M$
i) Show the calculations needed to go from EBITDA to FCFE. Answer Just do h) then c). a) What is the value per share for CompuStuff Inc. if there are 2.0 million outstan CAPM r=E(Ri) Rf Bi 15.5% 10% 1.00 FCFE -> growing perpetuity (like GGM) FCFE0 $ 12.30 M$ g 7.3% FCFE1 $ 13.20 Equity value $ 160.95 n shares 2 millions Value per share $ 80.48 Answer $ 80.48 per share g\Beta 0.75 1 1.25 5% $ 70.77 $ 61.50 $ 54.38 7.30% $ 96.69 $ 80.48 $ 68.92 9% $ 130.80 $ 103.13 $ 85.12 Answer: Between $ 54.38 and $ 130.80 03.4 - After carefully analysing their last financial statements, you estimate that C that it should continue to grow (forever) at 7.3%. Their cost of debt was 6.7% bef capital structure of 30% debt and 70% common equity. Their corporate tax rate i high at 10% because of poorly controlled inflation. The equity risk premium on th the company based on the past 5 years of monthly returns. (all % are per year) b) Sensitivity analysis : What is the range of plausible share prices if you actu
a) What is the (equity) value of the company based on your analysis? r 12.40% (in M$) t 0 1 2 Sales 30.00 36.00 43.20 Sales growth from previous year 20% 20% Net profit margin 10% 11% 12% Net Income 3.00 3.96 5.18 FCInv-Dep 2.40 2.88 3.46 WCInv 1.20 1.44 1.73 Net Borrowing 1.80 2.16 2.59 FCFE 1.20 1.80 2.59 Calculated FCFE growth 50% 44% Terminal value PV factor 0.8897 0.7915 PV of CF 1.6014 2.0516 Equity value 60.28 Answer 60.28 M$ b) How robust is your valuation to a change in plus or minus 0.5% in the long-ter minus 0.5% r 12.40% (in M$) t 0 1 2 03.5 - The company FluffyPillows Inc. has sold 30 M$ worth of their unicorn-them 10%, their Net Income was 3 M$. Due to the current popularity of unicorns, you more reasonable 6% after that. Because the company will improve its manufactu gradually increase by 1% until it reaches 15% in 5 years. You think that the invest Dep) will represent 8% of sales and the required increase in working capital will b be financed by new debt. Using the CAPM, you estimate that the required rate o
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Sales 30.00 36.00 43.20 Sales growth from previous year 20% 20% Net profit margin 10% 11% 12% Net Income 3.00 3.96 5.18 FCInv-Dep 2.40 2.88 3.46 WCInv 1.20 1.44 1.73 Net Borrowing 1.80 2.16 2.59 FCFE 1.20 1.80 2.59 Calculated FCFE growth 50% 44% Terminal value PV factor 0.8897 0.7915 PV of CF 1.6014 2.0516 Equity value 56.10 plus 0.5% r 12.40% (in M$) t 0 1 2 Sales 30.00 36.00 43.20 Sales growth from previous year 20% 20% Net profit margin 10% 11% 12% Net Income 3.00 3.96 5.18 FCInv-Dep 2.40 2.88 3.46 WCInv 1.20 1.44 1.73 Net Borrowing 1.80 2.16 2.59 FCFE 1.20 1.80 2.59 Calculated FCFE growth 50% 44% Terminal value PV factor 0.8897 0.7915 PV of CF 1.6014 2.0516 Equity value 65.17 Answer This would represent a change in valuation between
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c) If the current market capitalisation is 58.3 M$, is the stock over, fairly or under Answer Undervalued according to your analysis, but a small decrease in y a) What is the appropriate discount rate for the FCFF? Debt Pref. Sh. Comm. Sh. weight 30% 0% 70% cost 3.3800% 0.00 7.00% WACC 5.9140% Answer 5.9140% per year b) What is the (equity) value per share if the FCFF continue to grow at 4% forever FCFF -> growing perpetuity (like GGM) FCFF0 2.3 M$ g 4% FCFF1 2.3920 M$ Firm Value 124.9739 M$ Debt value 10.0000 M$ Equity value 114.9739 n shares 100000 Value per share $ 1,149.74 per share Answer $ 1,149.74 per share c) What is the increase in value per share compared to b) if the FCFF grow first a 03.6 - After carefully analysing their last financial statements, you estimate that H of debt was 5.2% before taxes. The company expects to soon reach its target cap corporate tax rate is currently 35%. The risk-free rate is 1% and the expected retu for the company based on the past 5 years of monthly returns. The market value 100 000 common shares outstanding. (all relevant % are per year)
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t 0 1 2 FCFF (M$) 2.3 2.5300 2.7830 FCFF growth from previous year 10% 10% Terminal value PV Factor 0.9441622448 0.8914423446 PV of CFs 2.3887 2.4809 Firm Value 191.0732 M$ Debt value 10.0000 M$ Equity value 181.0732 n shares 100000 Value per share $ 1,810.73 per share Increase $ 660.99 per share Or 57.5% Answer The value of each share increases by 57.5% d) What is the increase in value per share compared to b) if the FCFF grow first a t 0 1 2 FCFF (M$) 2.3 2.5300 2.7830 FCFF growth from previous year 10% 10% Terminal value PV Factor 0.9441622448 0.8914423446 PV of CFs 2.3887 2.4809 Firm Value 172.5635 M$ Debt value 10.0000 M$ Equity value 162.5635 n shares 100000 Value per share $ 1,625.63 per share Increase $ 475.90 per share Or 41.4% Answer The value of each share increases by 41.4%
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ng common shares? te for FCFE would be coherent with the valuation you've found in a)? oe&Bob Inc. had FCFF of 7.0 M$ over the last year and that xes and using the CAPM you've found a required return on 20% debt and 80% common equity. Their corporate tax $ and they are worth 22.0 M$ given the current level of ids Toyzz Inc. (in a separate Excel sheet).
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v-WCInv here n new fixed capital. This can be seen as an increase in gross fixed assets on the balance sheet and as an r example, have increased by 39 M$ over the last year. This 39 M$ has increased NI, but it's not a cash fl borrowing company increased its debt (for both notes payable and long-term debt). less than FCFF, unless there is a lot of borrowing.
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v
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-WCInv v-WCInv here n new fixed capital. This can be seen as an increase in gross fixed assets on the balance sheet and as an Machines Inc. (in a separate Excel sheet).
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borrowing company increased its debt (for both notes payable and long-term debt). less than FCFF, unless there is a lot of borrowing like it's the case here.
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v -WCInv
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nding common shares? [E(Rm)-Rf)] 5.5% per share CompuStuff Inc. had FCFE of 12.3 M$ over the last year and fore taxes. The company expects to maintain its target is currently 35%. The risk-free rate in this country is very his market is 5.5% and you have measured a beta of 1.0 for ually think that the FCFE growth could be between 5% and 9% and also that the company's beta could b
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3 4 5 6 7 8 9 51.84 54.95 58.25 61.74 65.45 69.37 73.54 20% 6% 6% 6% 6% 6% 6% 13% 14% 15% 15% 15% 15% 15% 6.74 7.69 8.74 9.26 9.82 10.41 11.03 4.15 4.40 4.66 4.94 5.24 5.55 5.88 2.07 2.20 2.33 2.47 2.62 2.77 2.94 3.11 3.30 3.49 3.70 3.93 4.16 4.41 3.63 4.40 5.24 5.56 5.89 6.24 6.62 40% 21% 19% 6% 6% 6% 6% We see that after year 5, FCFE grows at a constant 6% per 86.83 Growing perpetuity (GMM) 0.7042 0.6265 0.5574 2.5554 2.7542 51.3185 rm growth rate of sales? 3 4 5 6 med pillows over the last year. With a net profit margin of expect sales to grow at 20% for 3 years before settling for a uring efficiency, you also expect the profit margin to tment in fixed capital needed net of depreciation (FCInv- be about 4% of sales. Half of these increases in capital will of return is 12.4%. (all relevant % are per year)
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51.84 54.69 57.70 60.87 20% 5.5% 5.5% 5.5% 13% 14% 15% 15% 6.74 7.66 8.65 9.13 4.15 4.38 4.62 4.87 2.07 2.19 2.31 2.43 3.11 3.28 3.46 3.65 3.63 4.38 5.19 5.48 40% 21% 19% 5.5% 79.40 0.7042 0.6265 0.5574 2.5554 2.7412 47.1518 3 4 5 6 51.84 55.21 58.80 62.62 20% 6.5% 6.5% 6.5% 13% 14% 15% 15% 6.74 7.73 8.82 9.39 4.15 4.42 4.70 5.01 2.07 2.21 2.35 2.50 3.11 3.31 3.53 3.76 3.63 4.42 5.29 5.64 40% 22% 20% 6.5% 95.52 0.7042 0.6265 0.5574 2.5554 2.7672 56.1939 -6.93% and 8.11% .
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rvalued? your assumption for long-term growth could mean the stock is actually overvalued. CAPM r=E(Ri) Rf Bi [E(Rm)-Rf)] 7.0% 1% 1.20 5.0% T= 35% r? 10% for 8 years and then at 4% forever? HWP Inc. had FCFF of 2.3 M$ over the last year. Their cost pital structure of 30% debt and 70% common equity. Their urn for the market is 6%. You have measured a beta of 1.2 e of the company's debt is currently 10 M$ and there are
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3 4 5 6 7 8 9 3.0613 3.3674 3.7042 4.0746 4.4820 4.9303 5.1275 10% 10% 10% 10% 10% 10% 4% 267.8926036 0.8416662052 0.7946694537 0.7502968953 0.708402001 0.6688464235 0.631499541 2.5766 2.6760 2.7792 2.8864 2.9978 172.2875 a 10% for 4 years, 7% for the following 4 years and then at 4% forever? 3 4 5 6 7 8 9 3.0613 3.3674 3.6032 3.8554 4.1252 4.4140 4.5906 10% 10% 7% 7% 7% 7% 4% 239.8419206 0.8416662052 0.7946694537 0.7502968953 0.708402001 0.6688464235 0.631499541 2.5766 2.6760 2.7034 2.7312 2.7592 154.2475
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investing activity in the statement of cash flows. flow (yet). This increases the working capital required. Inventories works the same because it's als
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investing activity in the statement of cash flows.
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be between 0.75 and 1.25?
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10 11 77.95 82.63 6% 6% 15% 15% 11.69 12.39 6.24 6.61 3.12 3.31 4.68 4.96 7.02 7.44 6% 6% year. (Because sales grow at 6% and everything else is now proportional (no more margin improv
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so an asset. Because it's a liability, the increase in accounts payable decreases the amount of work
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vements))
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king capital needed. Accrued taxes and expenses work the same.
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(siyjod 1. Profit margin is 20% and the dividend payout ratio is 60%. Last year, total assets were RO 15,000 and sales represent 50% of total assets. The target debt/equity ratio (D/E) is 0.65. 1.1. What is the sustainable growth rate (SGR)? Interpret. 1.2. What is the internal growth rate (IGR)? Interpret.
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Consider the following information for kalebs kick boxing: profit margin 9.4%, capital intensity ratio 0.047, Debt equity ratio 0.7, Net income $23,000, dividends $11,730. Calculate the sustainable growth rate?
The Stieben Company has determined that the following will be true next year: T(ratio of total assets of sales)=1  P(net profit of margin)=5%    d(dividend pay out ratio)=50%    L(debt equity ratio)=1 a) What is Stieben's sustainable growth rate in sales? b)Can Stieben's actual growth rate in sales be different from its sustainable growth rate? Why or why not? c) How can Stieben change its sustainable growth?
Use the information below to calculate WACC given the Market Capitalization of       the company:               Market Cap = 193.2 Million     EBIT = 17.2 Million             Depreciation = 4.2 Million       Capital Expenditures = - 3.8 Million   Change in W/C = 2.1 Million      growth = 7%          FCF = ?                             WACC = ?
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Value in Valuation, Inc. is assessing the value of two companies, Company A and Company B, which projects average net cashflows in the next five years of P4,000,000 and 3,000,000, respectively. The required rate of return is both 8%. Which of the following has the higher equity value and by how much? And assuming that Company A is being sold at P48,000,000 while Company B is being sold at P36,500,000, what should be Value in Valuation’s best recommendation among the following choices: 1. To buy Company A because the selling price is higher than its equity value 2. To buy Company A because it is being sold at a discount of P2,000,000 3. To buy Company B because the selling price is lower than its equity value 4. To buy Company B because it is being sold at a premium of P1,000,000
Is the company growing? Explain. Be sure to include the percentages you got Millions of US $ $-94 $-38 $-36 $52 $-28 $-33 $-28 Annual Net Income 2022 2021 2020 2019 2018 2017 2016 To calculate growth versus prior years, use this formula: (this year's number minus last year's number)/Last year's number). This will give you the percentage change from the previous year. • • From 2016 to 2017: ((-$33 million)-(-$28 million))/(-$28 million)) *100= 17.86% • From 2017 to 2018: ((-$28 million)-(-$33 million))/(-$33 million) *100= -15.15% From 2018 to 2019: (($52 million)-(-$28 million))/(-$28 million) *100= -285.71% From 2019 to 2020: ((-$36 million)-($52 million))/ ($52 million) *100= -169.23% ● From 2020 to 2021: ((-$38 million)-(-$36 million))/(-$36 million) *100= 5.56% From 2021 to 2022: ((-$94 million)-(-$38 million)/(-$38 million) *100= 147.36% • ●
ACME Inc. has the following ratios: A0/S0- 1.3; LO/SO-0.40; profit margin-0.14; and the dividend payout ratio- .32, or 32%. Sales last year were $85 million. Assuming that these ratios will remain constant, use the AFN equation to determine the firm's self-supporting growth rate-in other words, the maximum growth rate ACME can achieve without having to employ non-spontaneous external funds. (Equation 9-2, which is 9-1, solving for g)
You are given the following information on Kaleb's Heavy Equipment:               Profit margin     6.3 %   Capital intensity ratio     .72     Debt-equity ratio     .8     Net income   $ 74,000     Dividends   $ 15,600       Calculate the sustainable growth rate. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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3)You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn’s has a reported equity beta of 1.4, a debt-to-equity ratio of .3, and a tax rate of 21 percent. Based on this information, what is the asset beta for Lauryn’s? 5)Lauryn’s Doll Co. had EBIT last year of $40 million, which is net of a depreciation expense of $4 million. In addition, Lauryn’s made $5 million in capital expenditures and increased net working capital by $3 million. Using the information from Problem 3, what is Lauryn’s FCF for the year?
a. During 2009, Gamma Corp had sales of $300 million, a net profit margin of 8% and a dividend payout ratio of 30%. At the end of the year, its total assets amounted to $500 million while its total debt was $200 million. Calculate Gamma's return on equity (ROE) and its sustainable growth rate (g*). Employ the DuPont system of financial ratios to arrive at your response. b. Suppose now that Gamma expects to maintain similar asset, sales and debt profiles but that, due to a cost savings initiative, the company expects to earn an additional $3 million in after tax income, all of which will be paid out in dividends. Recalculate Gamma's return on equity (ROE) and its sustainable growth rate (g*). Once again, employ the DuPont system of financial ratios to arrive at your response. How did your calculations differ in a. and b. and why?
What is the annual growth rate of this company for this financial accounting question?
A financial analyst wants to compute a company's weighted average cost of capital (WACC) using the dividend discount model. The company has a before-tax cost of new debt of 9%, tax rate of 37.5%, target debt-to-equity ratio of 0.76, current stock price of $74, estimated dividend growth rate of 7% and will pay a dividend of $3.2 next year. What is the company’s WACC A. 8 percent. B. 9 percent. C. 10 percent. D. 11 percent.
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If the last dividend paid by Chemical Brothers Inc. was $1.25 and analysts expect these payments to increase 4% per year, what will the stock price be next year if the required return is 15%? Select one: O a. $12.29 O b. $11.82 O c. $31.25 O d. $12.78 O e. $23.11
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a. Determine average annual dividend growth rate over the past 5 years. Using that growth rate, what dividend would you expect the company to pay next year? b. Determine the net proceeds, N, that the firm will actually receive. c. Using the constant-growth valuation model, determine the required return on the company's stock, rg, which should equal the cost of retained earnings, r,. d. Using the constant-growth valuation model, determine the cost of new common stock, r,.
Last year lakesha's lounge furniture corporation has a Roa calculation this question and correct answer
What should be the price earnings ratio of this company on these general accounting question?
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