Question

In: Accounting

f there are 500 million shares outstanding, use the following information to find a fair value...

f there are 500 million shares outstanding, use the following information to find a fair value for Galaxy Interiors stock using the Free Cash Flow (FCF) model.

GALAXY INTERIORS INCOME STATEMENT ($ in millions)

NET SALES $ 35,000

COST OF GOODS SOLD $ 17,500

DEPRECIATION $ 2,500

EARNINGS BEFORE INTEREST AND TAXES (EBIT) $ 15,000

INTEREST EXPENSE $ 1,300

TAXABLE INCOME (EARNINGS BEFORE TAXES; EBT) $ 13,700

TAXES (0.30) $ 4,110

NET INCOME $ 9,590

Assume the following:

• Free cash flow (FCF) will grow at 2.5%

• Galaxy's equity beta is 1.50

• Risk-free rate is 3% and market return is 13%

• Currently, Galaxy is not paying any dividends

• Book value of total debt is equal to the market value of debt

• further note that, FCF (Free cash flow) = EBIT*(1-t) + depreciation - NCS - change in NWC

approx. $125

approx. $199

approx. $375

approx. $258

GALAXY INTERIORS BALANCE SHEET (PAST & CURRENT)

($ IN MILLIONS)

PAST YR

CURRENT YR

PAST YR

CURRENT YR

CURRENT ASSETS

5500

6700

CURRENT LIABILITIES

2200

3000

(NET) FIXED ASSETS

25000

27000

LONG TERM DEBT

9300

9700

TOTAL ASSETS

30500

33700

TOTAL EQUITY

19000

21000

TOTAL LIAB & EQUITY

30500

33700

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

If there are 500 million shares outstanding, use the following information to find a fair value...
If there are 500 million shares outstanding, use the following information to find a fair value for Galaxy Interiors stock using the Free Cash Flow (FCF) model. GALAXY INTERIORS INCOME STATEMENT ($ in millions) NET SALES $        35,000 COST OF GOODS SOLD $        17,500 DEPRECIATION $          2,500 EARNINGS BEFORE INTEREST AND TAXES (EBIT) $        15,000 INTEREST EXPENSE $          1,300 TAXABLE INCOME (EARNINGS BEFORE TAXES; EBT) $        13,700 TAXES (0.30) $          4,110 NET INCOME $          9,590 GALAXY INTERIORS BALANCE SHEET (PAST & CURRENT) ($ IN MILLIONS) PAST YR CURRENT...
If there are 500 million shares outstanding, use the following information to find a fair value...
If there are 500 million shares outstanding, use the following information to find a fair value for Galaxy Interiors stock using the Free Cash Flow (FCF) model. GALAXY INTERIORS INCOME STATEMENT ($ in millions) NET SALES $ 35,000 COST OF GOODS SOLD $ 17,500 DEPRECIATION $ 2,500 EARNINGS BEFORE INTEREST AND TAXES (EBIT) $ 15,000 INTEREST EXPENSE $ 1,300 TAXABLE INCOME (EARNINGS BEFORE TAXES; EBT) $ 13,700 TAXES (0.30) $ 4,110 NET INCOME $ 9,590 Assume the following: • Free...
If there are 500 million shares outstanding, use the following information to find a fair value...
If there are 500 million shares outstanding, use the following information to find a fair value for Galaxy Interiors stock using the Free Cash Flow (FCF) model. GALAXY INTERIORS INCOME STATEMENT ($ in millions) NET SALES $        35,000 COST OF GOODS SOLD $        17,500 DEPRECIATION $          2,500 EARNINGS BEFORE INTEREST AND TAXES (EBIT) $        15,000 INTEREST EXPENSE $          1,300 TAXABLE INCOME (EARNINGS BEFORE TAXES; EBT) $        13,700 TAXES (0.30) $          4,110 NET INCOME $          9,590 GALAXY INTERIORS BALANCE SHEET (PAST & CURRENT) ($ IN MILLIONS) PAST YR CURRENT...
River Enterprises has ​$500 million in debt and 1818 million shares of equity outstanding. Its excess...
River Enterprises has ​$500 million in debt and 1818 million shares of equity outstanding. Its excess cash reserves are $16 million. They are expected to generate ​$206 million in free cash flows next year with a growth rate of 22​% per year in perpetuity. River​ Enterprises' cost of equity capital is 12​%. After analyzing the​ company, you believe that the growth rate should be 33​% instead of 22​%. How much higher​ (in dollars) would the price per share be if...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80 million shares outstanding. Company B has a market value of equity of $400 million and 25 million shares outstanding. Company A announces at the beginning of 2019 that is going to acquire Company B. The projected pre-tax gains in operating income (in millions of $) from the merger are: 2019 2020 2021 2022 2023 Pre-tax Gains in Operating Income 12 16 28 38 45 The projected pre-tax...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80 million shares outstanding. Company B has a market value of equity of $400 million and 25 million shares outstanding. Company A announces at the beginning of 2019 that is going to acquire Company B. The projected pre-tax gains in operating income (in millions of $) from the merger are: 2019 2020 2021 2022 2023 Pre-tax Gains in Operating Income 12 16 28 38 45 The projected pre-tax...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80 million shares outstanding. Company B has a market value of equity of $400 million and 25 million shares outstanding. Company A announces at the beginning of 2019 that is going to acquire Company B. The projected pre-tax gains in operating income (in millions of $) from the merger are: 2019 2020 2021 2022 2023 Pre-tax Gains in Operating Income 12 16 28 38 45 The projected pre-tax...
Company A has a market value of equity of $2,000 million and 80 million shares outstanding....
Company A has a market value of equity of $2,000 million and 80 million shares outstanding. Company B has a market value of equity of $400 million and 25 million shares outstanding. Company A announces at the beginning of 2019 that is going to acquire Company B. The projected pre-tax gains in operating income (in millions of $) from the merger are: 2019 2020 2021 2022 2023 Pre-tax Gains in Operating Income 12 16 28 38 45 The projected pre-tax...
YQR has a market value of $125 million and 5 million shares outstanding. HKG has a...
YQR has a market value of $125 million and 5 million shares outstanding. HKG has a market value of $40 million and 2 million shares outstanding. YQR thinks of taking over HKG with a premium of $10 million. The combined firm will be worth $185 million. If YQR offers 1.2 million shares of its stock in exchange for the 2 million shares of HKG, what will the stock price of YQR be after the acquisition? What exchange ratio between the...
Little Oil has outstanding one million shares with a total market value of $20 million. The...
Little Oil has outstanding one million shares with a total market value of $20 million. The firm is expected to pay $1 million of dividends next year, and thereafter the amount paid out is expected to grow by 5% a year in perpetuity. Thus the expected dividend is $1.05 million in year 2, $1.1025 million in year 3, and so on. However, the company has heard that the value of a share depends on the flow of dividends, and therefore...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT