Homework Answers
FIRM EQUITY VALUE 83712
| CURRENT | TERMINAL YEAR | |||||
| 2017 | 2018 | 2019 | 2020 | 2021 | ||
| ROPI | 2499 | 2624 | 2755 | 2893 | 3038 | 3099 |
| DISCOUNT FACTOR AT 6% | 0.9434 | 0.89 | 0.8396 | 0.7921 | ||
| PRESENT VALUE OF FUTURE (ROPI) | 2475.48 | 2451.95 | 2428.963 | 2406.4 | ||
| CUMMULATIVE PRESENT VALUE OF ROPI | 9,762.79 | |||||
| PRESENT VALUE OF TEMINAL ROPI | 61,367.95 | =(3099/.06-.02)*DF AT 6% OF 4TH YEAR | ||||
| NOA | 29,896.00 | |||||
| TOTAL FIRM VALUE | 1,01,026.74 | |||||
| PLUS MINUS NNO | -17314 | |||||
| FIRM EQUITY VALUE | 83,712.74 |
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The following are forecasted residual operating income (ROPI) for Reed Corporation for 2017: Current Forecast Horizon...
Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating...
Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016. Reported Horizon Period Terminal $ millions 2016 2017 2018 2019 2020 Period Sales $74,229 $75,714 $77,228 $78,773 $80,348 $81,151 NOPAT 3,340 3,407 3,475 3,545 3,616 3,652 NOA 22,269 22,714 23,168 23,632 24,104 24,345 Answer the following requirement assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million,...
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating...
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016 Reported Horizon Period Terminal $ millions 2016 Period 2017 2018 2019 2020 Sales $73,785 $75,261 $76,766 $78,301 $79,867 $80,666 3,630 NOPAT 3,312 3,387 3,454 3,524 3,594 23,443 NOA 21,445 21,872 22,309 22,755 23,210 Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of...
Estimating Share Value Using the DCF Model Following are forecasts of Illinois Tool Works Inc. sales,...
Estimating Share Value Using the DCF Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018 Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,664 $19,017 NOPAT 2.711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10.028 10,630 11,268 11,944 12.183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth...
please show work neatly and explain! 10. Assume the following expected free cash flows for Peterson...
please show work neatly and explain!
10. Assume the following expected free cash flows for Peterson Corporation for 2017: Current Forecast Horizon Terminal 2017 2018 2019 2020 2021 Year Free cash flows to the firm (FCFF) $4,651 54,884 $5,128 $5,384 $5,653 $5,766 The company has net nonoperating obligations (NNO) of $12,000 and 3,000 shares outstanding Calculate the per share stock price using the FCFF information above, a discount rate of 7%, and a terminal growth rate of 2%.
Question 3. 5 Marks Use the residual income valuation model and the forecasts and the other...
Question 3. 5 Marks Use the residual income valuation model and the forecasts and the other relevant data from the table below to compute equity value per share. 2007 2008 2009 2010 2011 2012 2006 forecast forecast forecast forecast forecast forecast Cost of capital for equity (r.) & discount factors 11.00% 1.110 1.232 1.368 1.518 1.685 1.870 Cost of capital (WACC) and discount factors 10.73% 1.107 1.226 1.358 1.843 RI Model - Terminal value growth rate 2.05% Sales Profit margin...
. QUESTION 4: (a) For each of the statements below, write T (True) or F (False)...
. QUESTION 4: (a) For each of the statements below, write T (True) or F (False) in the answer booklet next to the question number. For the statement which you believe is false, provide reasons why. (1) A firm has positive residual operating income (ROPI) in period t when its forecasted NOPAT in period t exceeds the expected amount computed as net operating assets at the start of period t multiplied by the cost of equity capital. (ii) In a...
please show work and be clear and neat 6. The advantage of the dividend discount model...
please show work and be clear and neat
6. The advantage of the dividend discount model is that: A) It is simple B) Dividends are easily observable C) Capital gains can be earned instead of dividends D) Firms publish their dividend policies E) All of the above 7. Assume that Bank of America Corp. reported a net loss of $584 million for the fiscal quarter. That day, Bank of America's stock price climbed from $16.23 per share to $16.37. This...
Help with #6? 6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for...
Help with #6?
6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for the Global Products Corporation. GLOBAL PRODUCTS CORPORATION BALANCE SHEETS 2016 FORECAST 2017 Cash $ 50,000 $ 60,000 Accounts receivable 200,000 290,000 Inventories 450,000 570,000 Total current assets 700,000 920,000 Fixed assets, net 300,000 380,000 Total assets $1,000,000 $1,300,000 Accounts payable 140,000 180,000 Accruals 50,000 70,000 Bank loan 80,000 90,000 co Total current liabilities 270,000 340,000 Long-term debt 400,000 550,000 Common stock ($1 par value)...
Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings,...
Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows: Market value of company FCF (1+WACC) + FCF (1+WACC)...
hey, it is kind a long question but, In 2017, BMC Software generated $465M of operating income (earnings before interest...
hey, it is kind a long question but, In 2017, BMC Software generated $465M of operating income (earnings before interest and taxes) and $295M of net income from $2,200M of sales. Over the next two years (2018 and 2019), the firm is projecting 10% growth in operating income and 5% growth in depreciation expense. Beginning in 2020, BMC estimates that free cash flows will grow 2%. Assume the firm’s effective tax rate is 30%, weighted average cost of capital is...
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016 Reported Horizon Period Terminal $ millions 2016 Period 2017 2018 2019 2020 Sales $73,785 $75,261 $76,766 $78,301 $79,867 $80,666 3,630 NOPAT 3,312 3,387 3,454 3,524 3,594 23,443 NOA 21,445 21,872 22,309 22,755 23,210 Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of...
Estimating Share Value Using the DCF Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018 Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,664 $19,017 NOPAT 2.711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10.028 10,630 11,268 11,944 12.183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth...
please show work neatly and explain!
10. Assume the following expected free cash flows for Peterson Corporation for 2017: Current Forecast Horizon Terminal 2017 2018 2019 2020 2021 Year Free cash flows to the firm (FCFF) $4,651 54,884 $5,128 $5,384 $5,653 $5,766 The company has net nonoperating obligations (NNO) of $12,000 and 3,000 shares outstanding Calculate the per share stock price using the FCFF information above, a discount rate of 7%, and a terminal growth rate of 2%.
Question 3. 5 Marks Use the residual income valuation model and the forecasts and the other relevant data from the table below to compute equity value per share. 2007 2008 2009 2010 2011 2012 2006 forecast forecast forecast forecast forecast forecast Cost of capital for equity (r.) & discount factors 11.00% 1.110 1.232 1.368 1.518 1.685 1.870 Cost of capital (WACC) and discount factors 10.73% 1.107 1.226 1.358 1.843 RI Model - Terminal value growth rate 2.05% Sales Profit margin...
. QUESTION 4: (a) For each of the statements below, write T (True) or F (False) in the answer booklet next to the question number. For the statement which you believe is false, provide reasons why. (1) A firm has positive residual operating income (ROPI) in period t when its forecasted NOPAT in period t exceeds the expected amount computed as net operating assets at the start of period t multiplied by the cost of equity capital. (ii) In a...
please show work and be clear and neat
6. The advantage of the dividend discount model is that: A) It is simple B) Dividends are easily observable C) Capital gains can be earned instead of dividends D) Firms publish their dividend policies E) All of the above 7. Assume that Bank of America Corp. reported a net loss of $584 million for the fiscal quarter. That day, Bank of America's stock price climbed from $16.23 per share to $16.37. This...
Help with #6?
6. (Equity Valuation Cash Flows] Following are financial statements (historical and forecasted) for the Global Products Corporation. GLOBAL PRODUCTS CORPORATION BALANCE SHEETS 2016 FORECAST 2017 Cash $ 50,000 $ 60,000 Accounts receivable 200,000 290,000 Inventories 450,000 570,000 Total current assets 700,000 920,000 Fixed assets, net 300,000 380,000 Total assets $1,000,000 $1,300,000 Accounts payable 140,000 180,000 Accruals 50,000 70,000 Bank loan 80,000 90,000 co Total current liabilities 270,000 340,000 Long-term debt 400,000 550,000 Common stock ($1 par value)...
Basic Stock Valuation: Free Cash Flow Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's future sales, costs and capital requirements, has led to an alternative stock valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows: Market value of company FCF (1+WACC) + FCF (1+WACC)...
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