FINANCIAL MANAGEMENT: THEORY AND PRACTIC
16th Edition
ISBN: 9780357691977
Author: Brigham
Publisher: CENGAGE L
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Textbook Question
Chapter 3, Problem 8MC
Use the extended DuPont equation to provide a breakdown of Computron’s projected
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Compute the following:
For fiscal 2019 and 2020: Current Ratio, Quick Ratio, Long Term Debt Ratio
For fiscal 2019 and 2020: Gross Profit Margin, Net Profit Margin, EBITDA
For fiscal 2019 and 2020: Return on Assets, Return on Equity, Return on Sales
For fiscal 2020: Free Cash Flow to Equity
Market Capitalization, Market to Book Value and the Price-Earnings Ratio as of year-end 2020
Stock Prices in 2018 = $68.98
2019 = $84.15
2020 = $107.82
Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate:
Table 9
Estimating price earning(P/E) ratios under various scenarios
Scenario
Cost of Equity Capital
Growth Rate in Earnings
P/E Ratio
1
0.13
0.09
2
0.13
0.11
3
0.15
0.09
4
0.18
0.09
5
0.18
0.11
For the companies Lockheed-Martin (LMT) & Northrop-Grumman (NOC)
Use Macrotrends data to calculate Return on Sales, Return on Assets, Debt
Ratio, Inventory Turnover, Lead Time for each company
Use Fintel to determine EPS forecasts for 2024-2027 for each company, and use
those to calculate an average earnings growth rate for each
-
https://fintel.io/sfo/us/Imt
https://fintel.io/sfo/us/noc
Assuming MARR = WACC + 3%, calculate a fair market price for the stock of
each company, assuming that earnings grow at the calculated rate for the next 50
years, with the following WACC
LMT:
NOC:
8.00%
8.25%
Find the current stock price for each company
Based on the above calculations, which company's stock would you buy, and
provide your reasoning (If neither or both, explain reasoning)
Chapter 3 Solutions
FINANCIAL MANAGEMENT: THEORY AND PRACTIC
Ch. 3 - Define each of the following terms:
Liquidity...Ch. 3 - Financial ratio analysis is conducted by managers,...Ch. 3 - Over the past year, M. D. Ryngaert Co. has...Ch. 3 - Profit margins and turnover ratios vary from one...Ch. 3 - How might (a) seasonal factors and (b) different...Ch. 3 - Why is it sometimes misleading to compare a...Ch. 3 - Greene Sisters has a DSO of 20 days. The company’s...Ch. 3 - Vigo Vacations has $200 million in total assets,...Ch. 3 - Winston Watchs stock price is 75 per share....Ch. 3 - Reno Revolvers has an EPS of $1.50, a free cash...
Ch. 3 - Needham Pharmaceuticals has a profit margin of 3%...Ch. 3 - Gardial Son has an ROA of 12%, a 5% profit...Ch. 3 - Ace Industries has current assets equal to 3...Ch. 3 - Assume you are given the following relationships...Ch. 3 - Prob. 9PCh. 3 - The Morrit Corporation has $600,000 of debt...Ch. 3 - Complete the balance sheet and sales information...Ch. 3 - The Kretovich Company had a quick ratio of 1.4, a...Ch. 3 - Data for Lozano Chip Company and its industry...Ch. 3 - The Jimenez Corporation’s forecasted 2020...Ch. 3 - Why are ratios useful? What three groups use ratio...Ch. 3 - Calculate the projected profit margin, operating...Ch. 3 - Calculate the projected inventory turnover, days...Ch. 3 - Prob. 4MCCh. 3 - Calculate the projected debt ratio, debt-to-equity...Ch. 3 - Calculate the projected price/earnings ratio and...Ch. 3 - Prob. 7MCCh. 3 - Use the extended DuPont equation to provide a...Ch. 3 - What are some potential problems and limitations...Ch. 3 - What are some qualitative factors that analysts...
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