JP Inc. had the following information expressed in millions of $: 2019 2020 Net Fixed Assets 2,000 2,500 After Tax Operating Income 700 925 Net Income 600 825 b. The growth rate of GDP is estimated to be on average 2.5% in the next few years. JP inc has a capital structure of 40% Debt and 60% Common Stock (Equity). Cost of debt prior to taxes is estimated to be 5% and cost of equity is estimated to 13%. Tax rate is estimated to be 35%. Based on this information and your solution in 18.a estimate the intrinsic value for this firm.

JP Inc. had the following information expressed in millions of $: 2019 2020 Net Fixed Assets 2,000 2,500 After Tax Operating Income 700 925 Net Income 600 825 b. The growth rate of GDP is estimated to be on average 2.5% in the next few years. JP inc has a capital structure of 40% Debt and 60% Common Stock (Equity). Cost of debt prior to taxes is estimated to be 5% and cost of equity is estimated to 13%. Tax rate is estimated to be 35%. Based on this information and your solution in 18.a estimate the intrinsic value for this firm.

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

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Hendo Inc. is constructing its pro forma financial statements for this year. At years end, Assets were $650,000 and Accounts Payable (the only liabilities account) was $175,000. Sales for the year were $825,000. Hendo expects to grow by 12% this year. Assets and Accounts Payable are expected to grow proportionally to Sales. Common Stock currently equals $175,000 and Retained Earnings are $127,000. Hendo plans to sell $18,000 of new common stock this year. The firm's profit margin on Sales is 5.5%, and 45% of its earnings will be paid out in dividends. How much NEW long-term debt financing will Hendo need this year to finance its expected growth? Hendo is currently operating at full capapcity.
The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Assume a growth rate of 30% in revenue, expenses, and assets in 2023. The tax rate will remain constant. Income Statement Sales Costs $ 4,550 2,050 Pretax income Taxes (at 30.0%) $ 2,500 750 Net income $ 1,750 Balance Sheet, Year-End 2022 Net assets $ 6,600 2021 $ 6,300 Total $ 6,600 $ 6,300 Debt Equity Total 2022 $ 2,800 3,800 2021 $ 2,700 3,600 $ 6,600 $ 6,300 a. Assume that the dividend payout ratio is fixed at 60% and the equity-to-asset ratio is fixed at two-thirds. What is the internal growth rate for 2023? b. What is the sustainable growth rate for 2023? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Internal growth rate b. Sustainable growth rate % %
Edwards Construction currently has debt outstanding with a market value of $75,000. The company has a WACC of 9 percent and has EBIT of $8,750 in the next year. The tax rate is 20%. What is the debt-to-value ratio if the EBIT’s growth rate is 5%? a. 42.86% b. 39.33% c. 96.42% d. 32.45%
(Using common-size financial statements) The S&H Construction Company expects to have total sales next year totaling $14,600,000. In addition, the firm pays taxes at 35 percent and will owe $294,000 in interest expense. Based on last year's operations the firm's management predicts that its cost of goods sold will be 63 percent of sales and operating expenses will total 27 percent. What is your estimate of the firm's net income (after taxes) for the coming year? Complete the pro-forma income statement below: (Round to the nearest dollar.) Pro-Forma Income Statement Sales Cost of goods sold Gross profit Operating expenses Net operating income Interest expense Earnings before taxes Taxes Net income $ $ $ $ $ C
The S&H construction company expects to have total sales next year totaling $15,300. In addition, the firm pays taxes at 35 percent and will owe $280,000 in interest expense. Based on last year’s operations the firm’s management predicts that its cost of goods sold will be 57 percent of sales and operating expenses will total 32 percent. What is your estimate of firm’s net income after taxes for the coming year? Complete the forma income statement below Round to the nearest dollar Pro-forma income statement Sales Cost of goods sold Gross profit Operating expenses Net operating income Interest expenses Earnings before taxes Taxes Net income
BestBatteries, Inc just published this Balance Sheet. All dollar amounts are in millions of dollars. Assets Cash 2.5 AR 2.5 Long Term Assets 10.0 Liabilities Accounts Payable 5.0 Loan, repayment due in 3 months, IRR = 7% 3.0 Bond maturing in 10 years, IRR = 10% 2.0 Equity 5.0 What is the company's weighted average, pre-tax cost of debt capital, rD, pre-tax? If not enough information is provided to solve this problem, answer 0.0 (zero).
The most recent financial statements for Crosby, Incorporated, appear below. Sales for 2022 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate also will remain constant. Costs, other expenses. current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2021 Income Statement Sales $750,000 Costs 585,000 Other expenses 21,000 Earnings before interest and taxes $144,000 Interest expense 17,000 Taxable income $127,000 Taxes (22%) 27.940 Net income $ 99,060 Dividends $ 29,718 Addition to retained earnings 69,342 CROSBY, INCORPORATED Balance Sheet as of December 31, 2021 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash Accounts receivable $ 20,940 43.880 Accounts payable Notes payable $ 55,100 14,300 Inventory 94,960 Total $ 69,400 Total $ 159,780 Long-term debt $ 133,000 Fixed assets Owners' equity Net plant and equipment $ 426,000 Common stock and…
C Company has the following data for the year ending 12/31/2020 (dollars are in thousands): Net income = $600; EBIT = $1,184; Total assets = $3,000; Short-term investments = $200; Total capital employed = $2,193; and tax rate = 30%. The company’s WACC is 11.07%. What was its Economic Value Added (EVA) for the year 2020? Round your answer to the nearest dollar. Group of answer choices: $583 $586 $577 $572 $580
(Using common-size financial statements) The S&H Construction Company expects to have total sales next year totaling $14,500,000. In addition, the firm pays taxes at 35 percent and will owe $306,000 in interest expense. Based on last year's operations the firm's management predicts that its cost of goods sold will be 60 percent of sales and operating expenses will total 26 percent. What is your estimate of the firm's net income (after taxes) for the coming year? Pro-Forma Income Statement Sales Cost of goods sold Gross profit Operating expenses Net operating income Interest expense Earnings before taxes Taxes Net income $ $ $ $ $
The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (21%) Net income Dividends Addition to retained earnings CROSBY, INCORPORATED 2020 Income Statement Inventory Total Current assets Cash Accounts receivable Total assets Fixed assets Net plant and equipment Assets Current assets Cash Pro Forma Income Statement Sales Costs Other expenses EBIT Interest Taxable income Taxes Net income Accounts receivable Inventory Total assets Total current assets Fixed assets Net plant and equipment EFN $ 27,475 56,265 Assets $ 20,940 31,970 71,320 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 $ 124,230 $ 341,980…
Nightwish Corporation shows the following information on its 2021 income statement: Sales $336,000; Costs = $20,600; Interest expense = $14,200; Taxes = $21,275; Dividends = $21,450. In addition, you're told that the firm issued $7,100 in new equity during 2021 and redeemed $5,400 in outstanding long-term debt. $194,700; Other expenses = $9,800; Depreciation expense = %3D a. What is the 2021 operating cash flow? (Do not round intermediate calculations.) b. What is the 2021 cash flow to creditors? (Do not round intermediate calculations.) c. What is the 2021 cash flow to stockholders? (Do not round intermediate calculations.) d. If net fixed assets increased by $53,200 during the year, what was the addition to NWC? (Do not round intermediate calculations.) a. Operating cash flow b. Cash flow to creditors c. Cash flow to stockholders d. Addition to NWC
a. Sales for 2018 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciationand amortization were 11% of net fixed assets, interest was $8,575,000, thecorporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Giventhis information, construct the firm’s 2018 income statement.b. Construct the statement of stockholders’ equity for the year ending December 31, 2018,and the 2018 statement of cash flows.c. Calculate 2017 and 2018 net operating working capital (NOWC) and 2018 free cashflow (FCF). Assume the firm has no excess cash.d. If Laiho increased its dividend payout ratio, what effect would this have on corporatetaxes paid? What effect would this have on taxes paid by the company’s shareholders?e. Assume that the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2018 EVA?f. Assume that the firm’s stock price is $22 per share and that at year-end 2018 the firmhas 10 million shares outstanding. What is the firm’s MVA at year-end 2018?

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