Homework Help is Here – Start Your Trial Now!
Business
Finance
Using PROBLEM 1, how much is the projected net income for 2022?

Using PROBLEM 1, how much is the projected net income for 2022?

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question

1. Using PROBLEM 1, how much is the projected net income for 2022?

2. Using PROBLEM 1, how much is the projected net cash flows from operating activities for 2026 must be?

3. Using PROBLEM 1, how much is the INTRINSIC Value of ABC Corporation?

4. Using PROBLEM 1, how much is the total present value of Free Cash Flows to ordinary shareholders of ABC Corporation?

5. Using PROBLEM 1, If your required return on investment is 12%, would you purchase the shares of ABC Corporation? Substantiate your answer.

YES

NO

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%.
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%.
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Forecasting Financial Statement
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS