What is the expected price of this stock

Assignment Help Financial Management

Reference no: EM131903375

1) Improving the cash conversion cycle

Use Wal-Mart's 2017 balance sheet and income statement from Hoover's database (access through the Regina Library) to calculate the Operating Cycle and Cash (Conversion) Cycle for Wal-Mart during the fiscal year ending in January, 2017.

Would Wal-Mart improve its Cash Conversion Cycle by reducing or increasing it? Explain your answer. List at least two ways that Wal-Mart could achieve this improvement.

Explain the possible risks Wal-Mart may face if it follows your suggestion.

2) Calculating the cash budget

Here are some important figures from the budget of Baltimore Baking for the first quarter of 2015:

January February March

Credit sales $ 300,000 $ 350,000 $ 350,000

Credit purchases 60,000 60,500 50,250

Cash disbursements

Wages, taxes, and expenses 42,750 49,000 51,250

Interest 8,300 8,300 8,300

Equipment purchases 79,000 81,000 0

In Baltimore Baking's experience, 7% of its credit sales will never be collected, 40% of its credit sales are paid in the month of the sale, and another 53% of its credit sales are paid in the month after the sale.

Credit purchases will be paid in the month following the purchase.

In December 2014, credit sales were $347,000 and credit purchases were $57,500. Using this information, complete the following cash budget (Round answers to the nearest whole dollar):

January February March

Beginning cash balance $ 655,000

$ ____________ $ ____________

Cash receipts

Cash collections from credit sales ____________ ____________ ____________

Total cash available ____________ ____________ ____________

Cash disbursements

Purchases ____________ ____________ ____________

Wages, taxes, and expenses ____________ ____________ ____________

Interest ____________ ____________ ____________

Equipment purchases ____________ ____________ ____________

Total cash disbursements ____________ ____________ ____________

Ending cash balance ____________ ____________ ____________

3) Supernormal Growth Model

GM is expected to grow at 12% in year 1, 11% in years 2 and 3, 8 % in year 4 and then grow at a constant rate of 5% in the years that follow. The required rate of return (Rs) equals 9%.

The company will pay a Dividend at the end of year 1 (D1) equal to 2.15. What is the expected price of this stock?

Reference no: EM131903375

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