Presented below is the forecasted data for ABC Corporation: 2023 Sales Cost of Sales Operating Expenses 2022 2024 2025 2026 3,375,000 4,125,000 4,875,000 5,250,000 6,000,000 1,968,750 2,156,250 2,343,750 2,437,500 2,625,000 975,000 1,125,000 1,275,000 1,350,000 1,500,000 Other relevant assumptions are as follows: a. Depreciation included in cost of sales and operating expenses amounted to P750,000 and P150,000 respectively. b. Operating expenses does not yet include any related financing costs. c. Annual capital investment requirements will be P300,000. d. The company estimates growth rate of 5% from 2027 onwards. e. The company has outstanding loans of P2,000,000 which pays 8% annual interest. The loan matures at P400,000 every year. f. The company has debt to equity ratio is 1.5. The pretax cost of equity is 12%. g. ABC Corporation have 1.20 million outstanding shares and is currently selling on the stock market at P35 per share. h. The company is subject to income tax of 30%.
Presented below is the forecasted data for ABC Corporation: 2023 Sales Cost of Sales Operating Expenses 2022 2024 2025 2026 3,375,000 4,125,000 4,875,000 5,250,000 6,000,000 1,968,750 2,156,250 2,343,750 2,437,500 2,625,000 975,000 1,125,000 1,275,000 1,350,000 1,500,000 Other relevant assumptions are as follows: a. Depreciation included in cost of sales and operating expenses amounted to P750,000 and P150,000 respectively. b. Operating expenses does not yet include any related financing costs. c. Annual capital investment requirements will be P300,000. d. The company estimates growth rate of 5% from 2027 onwards. e. The company has outstanding loans of P2,000,000 which pays 8% annual interest. The loan matures at P400,000 every year. f. The company has debt to equity ratio is 1.5. The pretax cost of equity is 12%. g. ABC Corporation have 1.20 million outstanding shares and is currently selling on the stock market at P35 per share. h. The company is subject to income tax of 30%.
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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Question
Using PROBLEM 1, how much is the projected net cash flows from operating activities for 2026 must be?
Using PROBLEM 1, how much is the INTRINSIC Value of ABC Corporation?
Using PROBLEM 1, how much is the total
Transcribed Image Text:PROBLEM 1
Presented below is the forecasted data for ABC Corporation:
2022
2023
2024
2025
2026
3,375,000 4,125,000 4,875,000 5,250,000 6,000,000
1,968,750 2,156,250 2,343,750 2,437,500 2,625,000
975,000 1,125,000 1,275,000 1,350,000 1,500,000
Sales
Cost of Sales
Operating Expenses
Other relevant assumptions are as follows:
a. Depreciation included in cost of sales and operating expenses amounted to
P750,000 and P150,000 respectively.
b. Operating expenses does not yet include any related financing costs.
c. Annual capital investment requirements will be P300,000.
d. The company estimates growth rate of 5% from 2027 onwards.
e. The company has outstanding loans of P2,000,000 which pays 8% annual interest.
The loan matures at P400,000 every year.
f. The company has debt to equity ratio is 1.5. The pretax cost of equity is 12%.
g. ABC Corporation have 1.20 million outstanding shares and is currently selling on the
stock market at P35 per share.
h. The company is subject to income tax of 30%.
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