Problem 1 The analyst is analyzing the financial statements of another Yettobe corporation (the statements are...

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Problem 1 The analyst is analyzing the financial statements of another Yettobe corporation (the statements are in million dollars). Its stock is currently traded at $50 and it has 20 million shares outstanding. The firm's market value of debt is 120 millions. The shareholders require a return of 15% and before-tax cost of debt is 10%. Assume that the expected long-term growth rates in FCFF, FCFE, dividends, and residual income are 4%. Using the constant growth model to compute the following: Balance sheet Current assets Cash 2021 2022 Income statement 2022 Revenue 2,500 17 18 (-) Cost of goods sold 2,000 Accounts receivable 23 20 Gross profit 500 Inventory 4 3 (-) SG&A 250 Total current assets 44 44 41 (-) Depreciation 50 Fixed assets EBIT 200 Gross property, plant, and equipment 920 1,000 (-) Interest expense 20 Accumulated depreciation Total (50) (100) EBT 180 fixed assets 870 900 (-) Taxes (at 20%) 36 Net Income Total assets 914 941 144 Current liabilities Accounts payable 14 12 Short-term debt 50 60 Total current liabilities 64 72 Long-term debt 222 227 Total liabilities 286 299 Shareholders' equity Commonstock 548 548 Retained earnings 80 94 Total equity 628 642 Total liabilities and owner's equity 914 941 Problem 1 The analyst is analyzing the financial statements of another Yettobe corporation (the statements are in million dollars). Its stock is currently traded at $50 and it has 20 million shares outstanding. The firm's market value of debt is 120 millions. The shareholders require a return of 15% and before-tax cost of debt is 10%. Assume that the expected long-term growth rates in FCFF, FCFE, dividends, and residual income are 4%. Using the constant growth model to compute the following: Balance sheet Current assets Cash 2021 2022 Income statement 2022 Revenue 2,500 17 18 (-) Cost of goods sold 2,000 Accounts receivable 23 20 Gross profit 500 Inventory 4 3 (-) SG&A 250 Total current assets 44 44 41 (-) Depreciation 50 Fixed assets EBIT 200 Gross property, plant, and equipment 920 1,000 (-) Interest expense 20 Accumulated depreciation Total (50) (100) EBT 180 fixed assets 870 900 (-) Taxes (at 20%) 36 Net Income Total assets 914 941 144 Current liabilities Accounts payable 14 12 Short-term debt 50 60 Total current liabilities 64 72 Long-term debt 222 227 Total liabilities 286 299 Shareholders' equity Commonstock 548 548 Retained earnings 80 94 Total equity 628 642 Total liabilities and owner's equity 914 941