Consider the following data. I/S 2015 2016 Sales (S) 1,200 1,320 (+10%) - Costs (C) (COGS...
- Consider the following data.
|
I/S |
2015 |
2016 |
|
|
Sales (S) |
1,200 |
1,320 (+10%) |
|
|
- Costs (C) (COGS & SG&A) |
1,000 |
||
|
= EBITDA (=EBIT) |
200 |
||
|
- Interest |
20 |
||
|
=EBT |
180 |
||
|
- Tax (T) |
40 |
||
|
= NI |
140 |
||
|
40 |
||
|
100 |
||
|
B/S |
|||
|
Assets (A) |
2,000 |
||
|
Debt (D) |
800 |
||
|
Equity (E) |
1,200 |
||
|
800 |
||
|
400(+100) |
||
From these data, calculate the following ratios, showing all work:
|
Margin Cost = |
|
Turnover (TO) |
|
Interest Rate |
|
Tax Rate |
|
Leverage |
Assume that depreciation is included in “Costs”. Using these ratios, calculate the I/S and B/S for 2016.
Assume that the leverage remains constant (at 0.40).
Assume the common stock remains constant (at 800), that is no new common stock is issued.
1. Continued
- Using these data, calculate the cash flow to be discounted (CF) for 2016.
- Assuming that this CF increases by 10% per year indefinitely, what is the value of the company? (Use a discount rate (r) of 15%)
- What is the dividend paid during 2016? What is the dividend yield? What is retained earnings (RE) at the end of 2016?
Homework Answers
Margin Cost = $ 1000 - i.e COGS is the marginal cot of production, since we donet have the brekadown of Fixed cost or variable cost.
Turnover (TO) = Sales/ Assets = 1200/2000 = 0.60
Interest Rate = Interest is paid on Debt so interest is paid is 20 on debt 800 = 20/800 = 2.5%
Tax Rate = Tax is calculated on income before tax (EBT) so tax paid is 40 on EBT of 180 = 40/180 = 22.22%
Leverage = Leverage ratio gives the the proportion of debt in comparison to equity = Debt / Equity (800/1200) = 66.67%
| I/S | 2015 | 2016 | ||
| Sales (S) | 1,200 | 1,320 (+10%) | ||
| - Costs (C) (COGS & SG&A) | 1,000 | 1100.00 | COGS is increasing 10% as per the notes | |
| = EBITDA (=EBIT) | 200 | 220.00 | ||
| - Interest | 20 | 20 | ||
| =EBT | 180 | 200.00 | ||
| - Tax (T) | 40 | 44.44 | ||
| = NI | 140 | 155.56 | ||
| Dividend | 40 | 44 | Assuming Dividend increases by 10% every year | |
| Plowback | 100 | 111.56 |
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