Sales 3 million dollars per year Cost of goods 1.7 million dollars per year Cash Expenses...

Sales 3 million dollars per year Cost of goods 1.7 million dollars per year Cash Expenses 725 thousand dollars per year Depreciation Expense 125 thousand dollars per year Cash on the balance sheet 150 thousand dollars Receivables on the balance sheet 75 thousand dollars Inventory on the balance sheet 300 thousand dollars Fixed asset net of depreciation on the balance sheet 450 thousand dollars Total Current Liabilities on the balance sheet 175 thousand dollars Total Long Term Debt on the balance sheet 600 thousand dollars Your required return if you invest in this business is 20 percent. This is the figure you will use to calculate the present value of EBITDA. You will also buy the receivables and inventory from the current owner. But you will not buy the cash on the balance sheet. You will assume all current liabilities and all total long-term debt of the business. Assignment: 1. Create an income statement (down to EBIT) and a balance sheet using the data provided above. The balance sheet should include total assets and total liabilities and equity. Use the format for these statements that is shown in the example within the week four online lecture A Simple Way to Value a Business. (15 points) 2. Calculate EBITDA for this business. (5 points) 3. Calculate the business value for this business using the formula in the week four online lecture A Simple Way to Value a Business. There is an example in this lecture that should be carefully studied. (10 points) Clearly identify each problem with the number 1, 2, or 3 associated with it. This makes it possible to grade your problems. Please submit your work as an excel file.

Solutions

Expert Solution

Fig.in mlns
1.Income statement		Balance sheet
Sales	3	Cash	0.15	Current liabilities	0.175
COGS	1.7	Receivables	0.075	LT Debt	0.6
Gross margin	1.3	Inventory	0.3	Equity(Bal.)	0.2
Cash expenses	0.725	Fixed assets ,net	0.45
Depn.	0.125	Total assets	0.975		0.975
EBIT	0.45


2. EBITDA=EBIT+Depn.
ie.0.45+0.125=
0.575
Millions
ie. $ 575000

Value of firm= PV of future EBITDAs discounted at the reqd. rate of return, 20%--ie.EBITDA/Reqd. return
ie.0.575/20%=
2.875
millions

Balance sheet(after buying)
Cash(Bal.fig.)	2.825	Current liabilities	0.175
Receivables	0.075	LT Debt	0.6
Inventory	0.3	Equity(Bal.)	2.875
Fixed assets ,net	0.45
Total assets	3.65		3.65

jeff jeffy answered 2 days ago

Next > < Previous

Related Solutions

Consider a company with sales of $18,000.0 million, cost of goods sold of 42% of sales, other expenses including salaries

Consider a company with sales of $18,000.0 million, cost of goods sold of 42% of sales, other expenses including salaries ( we usually call this SG&A for selling, general and administrative) of 1750.0million, depreciation of 2250.0 million, and interest expense of 2300 million. tax rate =21%.a. generate an income statement and show net incomeb. what is the company's operating cash flow?c. if there are 775.2 million shares outstanding, what is the EPS?d. if the company has a payout ratio of...

sales are1.53 million, cost of goods sold is 615000, depriciation, expense is 153,000, other operating expenses...

sales are1.53 million, cost of goods sold is 615000, depriciation, expense is 153,000, other operating expenses is $303,000 addition to retained earnings is 145,700,dividends per share is $1,tax rate is 30 percent,and number of shares of common stock outstanding is 93,000 Latonya's Flop Shops has no preferred stock outstanding. use above info to calculate the times interest earned ratio for Latonya's Flop Shops, inc (rd your ans to 2 decimal places

Butterfly Tractors had $17.50 million in sales last year. Cost of goods sold was $8.70 million,...

Butterfly Tractors had $17.50 million in sales last year. Cost of goods sold was $8.70 million, depreciation expense was $2.70 million, interest payment on outstanding debt was $1.70million, and the firm’s tax rate was 30%. a. What was the firm’s net income? (Enter your answers in millions rounded to 2 decimal places.) b. What was the firm’s cash flow? (Enter your answers in millions rounded to 2 decimal places.) c. What would happen to net income and cash flow if...

Butterfly Tractors had $21.50 million in sales last year. Cost of goods sold was $9.50 million,...

Butterfly Tractors had $21.50 million in sales last year. Cost of goods sold was $9.50 million, depreciation expense was $3.50 million, interest payment on outstanding debt was $2.50 million, and the firm’s tax rate was 30%. a. What was the firm’s net income and net cash flow? (Enter your answers in millions rounded to 2 decimal places. For example, for $3.92 million, enter "3.92", not "3920000") Net income $ million Net cash flow $ million b. What would happen to net income...

Butterfly Tractors had $15.00 million in sales last year. Cost of goods sold was $8.20 million,...

Butterfly Tractors had $15.00 million in sales last year. Cost of goods sold was $8.20 million, depreciation expense was $2.20 million, interest payment on outstanding debt was $1.20 million, and the firm’s tax rate was 21%. a. What was the firm’s net income? (Enter your answers in millions rounded to 2 decimal places.) b. What was the firm’s cash flow? (Enter your answers in millions rounded to 2 decimal places.) c. What would happen to net income and cash flow...

Premium Excavators had $14 million in sales last year. Cost of goods sold was $8 million,...

Premium Excavators had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was $2 million, interest payments on outstanding debt was $1 million, and the firm’s tax rate was 21%. What was the firm’s net income? What was the firm’s cash flow? What would happen to net income and cash flow if depreciation were increased by $1 million? Would you expect the change in depreciation o have a positive or negative impact on the...

2013 (Thousands of Dollars, Except Earnings per Share) Sales revenue $978,000 Cost of goods sold 648,000...

2013 (Thousands of Dollars, Except Earnings per Share) Sales revenue $978,000 Cost of goods sold 648,000 Net income 60,600 Dividends 16,800 Earnings per share 4.04 Packard Plastics, inc. Balance Sheets (Thousands of Dollars) Dec. 31, 2013 Dec. 31, 2012 Assets Cash $4,920 $2,700 Accounts receivable (net) 80,280 60,900 Inventory 177,600 140,000 Total Current Assets 219,000 203,600 Plant assets (net) 215,000 194,000 Other assets 5,300 3,900 Total Assets $439,300 $401,500 Liabilities and Stockholders' Equity Notes payable-banks $37,200 $25,000 Accounts payable 33,120...

118. A 30 year project is estimated to cost $35 million dollars and provide annual cash...

118. A 30 year project is estimated to cost $35 million dollars and provide annual cash flows of $5 per year in years 1-5; $4 million per year in years 6-20 and $2 million per year in years 21-30. If the company's required rate of return is 10%, determine the discounted payback for the project.

Eagle Corporation had $10 Million in Sales last year. Cost of goods sold were $6 Million,...

Eagle Corporation had $10 Million in Sales last year. Cost of goods sold were $6 Million, depreciation expense was $1 Million, interest payment on outstanding debt was $2 Million, and the firm’s tax rate is 35%. What was Eagle Corporation’s Net Income (after tax)? What was Eagle Corporation’s Net Cash Flow? (1 point) What would happen to Net Income and Cash Flow if Depreciation increased by $1 Million? What would happen to Net Income and Cash Flow is the Depreciation...

The sales of a company (in million dollars) for each year are shown in the table...

The sales of a company (in million dollars) for each year are shown in the table below. Is there evidence of a linear relationship between the two variables, and are they positively correlated? x (years since 2010) 5 6 7 8 9 y (sales in millions) 12 19 29 37 45 a. Assign variables and sketch the scatter gram b. State the Null and Alternative Hypotheses as if a complete hypothesis test had been conducted. c. Find the linear...

Subjects