Income statement year 1 year 2 Sales $4,000 $4,800 Operating costs -$3,400 -$4,080 Depreciation -$50 -$55 EBIT $550 $665 Interes -$20 -$26 Taxes (40% -$212 -$255 Net income $318 $383 Assets Year 1 Year 2 Cash $10 $15 Accounts receivable $150 $200 Inventories $200 $250 Current assets $360 $465 Gross: plant & equipment $1,000 $1,100 Less: depreciation -$500 -$555 Net plant & equipment $500 $545 Total $860 $1,010 Liabilities & equity Year 1 Y2 Accounts payable $90 $120 Notes payable $50 $50 Accruals $60 $80 Current liabilities $200 $250 Long term debt $150 $210 Common stock $382 $382 Retained earnings $128 $168 Total $860 $1,010 Calculate FCF for Year 2. Assume: - FCF will grow at constant rate of 3.25% year 2 through infinity. - year 1 has total book value of debt of $200 and this is good approximation of market value of debt. firm's weighted average cost of capital is 9%- firm has 1,000 shares of stock outstanding. determine the intrinsic price per share of the firm's stock should be today.
Income statement year 1 year 2 Sales $4,000 $4,800 Operating costs -$3,400 -$4,080 Depreciation -$50 -$55 EBIT $550 $665 Interes -$20 -$26 Taxes (40% -$212 -$255 Net income $318 $383 Assets Year 1 Year 2 Cash $10 $15 Accounts receivable $150 $200 Inventories $200 $250 Current assets $360 $465 Gross: plant & equipment $1,000 $1,100 Less: depreciation -$500 -$555 Net plant & equipment $500 $545 Total $860 $1,010 Liabilities & equity Year 1 Y2 Accounts payable $90 $120 Notes payable $50 $50 Accruals $60 $80 Current liabilities $200 $250 Long term debt $150 $210 Common stock $382 $382 Retained earnings $128 $168 Total $860 $1,010 Calculate FCF for Year 2. Assume: - FCF will grow at constant rate of 3.25% year 2 through infinity. - year 1 has total book value of debt of $200 and this is good approximation of market value of debt. firm's weighted average cost of capital is 9%- firm has 1,000 shares of stock outstanding. determine the intrinsic price per share of the firm's stock should be today.
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
Problem 1PS
Related questions
Question
| Income statement | year 1 | year 2 |
| Sales | $4,000 | $4,800 |
| Operating costs | -$3,400 | -$4,080 |
| -$50 | -$55 | |
| EBIT | $550 | $665 |
| Interes | -$20 | -$26 |
| Taxes (40% | -$212 | -$255 |
| Net income | $318 | $383 |
| Assets | Year 1 | Year 2 |
| Cash | $10 | $15 |
| Accounts receivable | $150 | $200 |
| Inventories | $200 | $250 |
| Current assets | $360 |
$465 |
| Gross: plant & equipment | $1,000 | $1,100 |
| Less: depreciation | -$500 | -$555 |
| Net plant & equipment | $500 | $545 |
| Total | $860 | $1,010 |
| Liabilities & equity | Year 1 | Y2 |
| Accounts payable | $90 | $120 |
| Notes payable | $50 | $50 |
| Accruals | $60 | $80 |
| Current liabilities | $200 | $250 |
| Long term debt | $150 | $210 |
| Common stock | $382 | $382 |
| $128 | $168 | |
| Total | $860 | $1,010 |
Calculate FCF for Year 2. Assume:
- FCF will grow at constant rate of 3.25% year 2 through infinity.
- year 1 has total book value of debt of $200 and this is good approximation of market value of debt.
firm's weighted average cost of capital is 9%
- firm has 1,000 shares of stock outstanding.
determine the intrinsic price per share of the firm's stock should be today.
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