Reference no: EM13878227
Suppose that JML Corp. has outstanding debt, preferred stock, and common stock. For this year, the firm expects to have sales of $5,000 million, cost of goods sold of $3,500 million, operating expenses (including depreciation expenses) of $650 million, an upper marginal corporate tax rate of 36%, depreciation expenses of $200 million, an annual increase in capital expenditures of $10 million (mainly for replacement and maintenance issues), an increase of account receivables and cash by $125 million, increases of accounts payable and accrued expenses of $110 million, interest expenses of $400 million, and a retirement of debt of $10 per annum. Note that the firm does not pay common stock dividends.
a) What is JML's common stock price using the Gordon Growth Model?
b) What is JML's common stock price using the Dividend Growth Model?
c) What is JML's Free Cash Flows for this year?
d) What is JML's Free Cash Flow to Equity Holders for this year?
e) If JML Corp. has a fixed, annual cost of common equity of 10%, what is the total value of JML Corp. if the firms has a fixed, annual Free Cash Flow to Equity holder growth rate of 5%?
f) If JML Corp. has a total amount of debt worth $1386 million and $1,511 million in preferred equity outstanding, what is the total residual value of JML's common equity
g) Based on your answer to part f, what is JML Corp's common equity price per share if the firm has 187 million shares outstanding?
i) Repeat parts e through g assuming that the firm has no Free Cash Flow to Equity holder growth rate.
h) Repeat parts e through h assuming that the information provided to you actually pertains to next year
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