Problem 6-32 Stock Valuation and Cash FlowsAnya Manufacturing has projected sales of $116 million next year. Costs are expected to be $67.2 million, and net investment is expected to be $12.6 million. Each of these values is expected to grow at 10 percent the following year, with the growth rate declining by 1 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 4.9 million shares of stock outstanding and investors require a return of 11 percent on the company’s stock. The corporate tax rate is 22 percent. a.What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b.Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 13. What is your new estimate of the company’s stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a.Share price b.Share price

Value of stock can be determined as the present value of cash flow from the project and also present…

Answered: expected to be $67.2 million, and net…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Problem 6-32 Stock Valuation and Cash Flows

Anya Manufacturing has projected sales of $116 million next year. Costs are expected to be $67.2 million, and net investment is expected to be $12.6 million. Each of these values is expected to grow at 10 percent the following year, with the growth rate declining by 1 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 4.9 million shares of stock outstanding and investors require a return of 11 percent on the company’s stock. The corporate tax rate is 22 percent.

a.	What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 13. What is your new estimate of the company’s stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)


a.	Share price
b.	Share price

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Problem 19.20 Tomey Supply Company's financial statements for the most recent fiscal year are shown below. The company projects that sales will increase by 15 percent next year. Assume that all costs and assets increase directly with sales. The company has a constant 26 percent dividend payout ratio and has no plans to issue new equity. Any financing needed will be raised through the sale of long- term debt. Prepare pro forma financial statements for the coming year based on this information, and calculate the EFN for Tomey. (Round intermediate calculation to the nearest whole dollar, e.g. 5,275. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Tomey Supply Company Income Statement and Balance Sheet Income Statement Balance Sheet Revenues $1,768,121 Assets Costs 1,116,487 Current Assets $280,754 EBT 651,634 Net Fixed Assets 713,655 Taxes (35%) 228,072 Total assets $994,409 Net Income $423,562 Liabilities and Equity: Current…

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