Start with the partial model in the file Ch12 P11 Build a Model.xlsx on the textbook's Web

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Start with the partial model in the file Ch12 P11 Build a Model.xlsx on the textbook's Web site, which contains Henley Corporation's most recent financial statements. Use the following ratios and other selected information for the current and projected years to answer the next questions.

Start with the partial model in the file Ch12 P11

a. Forecast the parts of the income statement and balance sheet that are necessary for calculating free cash flow.
b.
Calculate free cash flow for each projected year. Also calculate the growth rates in free cash flow each year to ensure that there is constant growth (that is, the same as the constant growth rate in sales) by the end of the forecast period.
c. Calculate the return on invested capital ROIC NOPAT Total net operating capital and the growth rate in free cash flow. What is the ROIC in the last year of the forecast? What is the long-term constant growth rate in free cash flow (gL is the growth rate in FCF in the last forecast period because all ratios are constant)? Do you think that Hensley's value would increase if it could add growth without reducing its ROIC?
d. Calculate the current value of operations.
e. Calculate the intrinsic price per share of common equity as of 12/31/2016.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...
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Financial Management Theory and Practice

ISBN: 978-1305632295

15th edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

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