Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The following information is given: Baseline (last year) sales: $250 million Sales growth rates: Base year = 15% with a fade rate of 1% a year for years 1-10: (increasing sales due to sustained competitive advantage and a differentiated product)[source: Strategic Plan]. Fade rate is the rate of decline per year (each year) from a base year. Sales growth rate in year 10 and forward: 5% (in year 11, the competition has caught up and the market has reached maturity) [source: Strategic Plan] Profit margin: Base year = 20%, with a fade rate of 1% a year for years 1-10: (during the period of competitive advantage, the firm can charge higher prices, but its profit margin slowly declines as competition increases) [source: Strategic Plan] Profit margin in year 10 and going forward: 10% [source: Strategic Plan] Fixed capital investment rate: 15% (for every dollar of new sales, we need an additional investment in fixed plant and equipment of $.15) [source: historical relationship] Working capital investment rate: 9% (for every dollar of new sales we need an additional investment in inventories and receivables of $.09) [source: historical relationship] Cash tax rate: 38% [source: historical relationship] Cost of capital: 11% [source: current yield on firm's debt and the cost of equity estimated using the Capital Asset Pricing Model, weighted average based on the target capital structure] Marketable securities: $20 million Market value of firm's debt: $50 million The firm has 5 million shares of common stock outstanding selling at: Scenario 1 = $50/share and Scenario 2 = $70/share. As indicated, the values assigned to drivers link directly to the strategic plan and the associated strategic analysis. In arriving at these estimates strategic alternatives have been evaluated for their value creation potential, with the set of strategies selected that create the most shareholder wealth. What is the PV of operating cash flows over the competitive advantage period? What is the residual value of the firm after the period of competitive advantage? What is the value of the firm's equity? Compare the market value of equity ($50/share) with the estimate provided by SVA for scenario 1. What recommendations would you make to top management based on your analysis? Now compare the market value of equity ($70/share) with your SVA estimate. What would you recommend now?
SEND EXCEL FILE
The Burk Company has a ratio of long-term debt to long-term debt plus equity of .34 and a current ratio of 1.6. Current liabilities are $900, sales are $6,320, profit margin is 9.1 percent, and ROE is 19.5 percent. What is the amount of the firm’s ne..
How much would Barry (from problem 1) have at retirement if he had started this plan at age 25?- How much would Barry have if he could earn a 10% return on his investment beginning at age 35?
Bella, Inc. has net income of $3,500,000. The company‘s depreciation expense is $650,000, its interest expense is $200,000, and its income tax rate is 40%. What is its taxable income?
Assume that FCF will continue to grow at the growth rate for the last year in the forecast horizon. What is the horizon value at 2017? What is the present value of the horizon value? What is the present value of the forecasted FCF? What is the curren..
National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual dividend of $8 per share. The company has been losing money and has not paid preferred dividends for the last five years. How much is the ..
Geothermal corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market e..
A perpetuity pays 2 at the end of the 4th year, 4 at the end of the 6th year, 6 at the end of the 8th year, and so on. Find the present value (at time 0) of the perpetuity using the effective annual interest rate of 10%.
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon r..
When calculating the risk of a portfolio, you should adjust the process by the covariance, or interrelationship, of security price dispersion. When calculating the risk of a portfolio, you should add the weighted average of the standard deviation of ..
Replicating portfolios: Stock ABC is currently trading at $20. There is a 60% real-world probability that six months in the future the price will go up to $23. There is a 40% real-world probability that six months in the future the price will go down..
You have just computed the Beta of a stock to be 2.5 and the estimate of the relevant risk-free rate is 5%. The expected market return next period is 12% and your estimate of Ke is 23%. What is the appropriate long-run market risk premium? a. 7.0% b...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.05 −36% −11% Mild recession 0.20 −12% 13% Normal growth 0.40 15% 4% Boom 0.35 32% 5% b. Calculate the values of mean return and v..
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd