In: Finance
As of December 31, 2009, a company’s assets consisted of $60,000 of cash, $120,000 of marketable securities, $200,000 of accounts receivable, $300,000 of inventory, and $1,200,000 of net plant and equipment. Its liabilities consisted of $50,000 of accounts payable, $20,000 of accruals, $70,000 of notes payable, and $600,000 of long-term debt.
As of December 31, 2010, the company’s assets consisted of $70,000
of cash, $140,000 of marketable securities, $250,000 of accounts
receivable, $400,000 of inventory, and $1,300,000 of net plant and
equipment. Its liabilities consisted of $65,000 of accounts
payable, $15,000 of accruals, $75,000 of notes payable, and
$600,000 of long-term debt.
In 2010, the company’s annual sales were $4,700,000, earnings
before interest and taxes were $800,000, it paid $60,000 of
interest, and its tax rate was 30%. The company’s weighted average
cost of capital is 11% per year and it has 500,000 shares of common
stock outstanding. The company expects its free cash flow to grow
forever at a rate of 6% per year. Estimate the value per share of
the company’s common stock.
Please complete in excel and post answer and formulas.
cash |
60000 |
70000 |
EBIT |
800000 |
|||
marketable securities |
120000 |
140000 |
interest |
60000 |
|||
accounts receivables |
200000 |
250000 |
EBT |
740000 |
|||
inventory |
300000 |
400000 |
less tax-30% |
222000 |
|||
net plant & assets |
1200000 |
1300000 |
EAT |
518000 |
|||
total of assets |
1880000 |
2160000 |
|||||
cash flow from operating activities |
|||||||
accounts payable |
50000 |
65000 |
Earning after tax |
518000 |
|||
accruals |
20000 |
15000 |
add changes in working capital |
||||
notes payable |
70000 |
75000 |
increase in accounts receivables |
-50000 |
|||
long term debt |
600000 |
600000 |
increase in inventory |
-100000 |
|||
increase in accounts payable |
15000 |
||||||
decrease in accruals |
-5000 |
||||||
increase in marketable securities |
-20000 |
||||||
cash flow from operating activities |
358000 |
||||||
Free cash flow = cash flow from operating activities- capital expenditure |
358000-100000 |
258000 |
|||||
value of stock |
free cash flow*(1+growth rate) / (required rate of return - growth rate) |
258000*(1.06) / (11%-6%) |
5469600 |
||||
value per share |
5469600/500000 |
10.94 |