Problem 9-28 Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of $121.5 million...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Problem 9-28 Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of $121.5 million next year. Costs are expected to be $72 million and net investment is expected to be $14.15 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6 million shares of stock outstanding and investors require a return of 12 percent return on the company's stock. The corporate tax rate is 23 percent. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 12. What is your new estimate of the company's stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Share price $ 78.56 b. Share price $ 77.22 Problem 9-28 Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of $121.5 million next year. Costs are expected to be $72 million and net investment is expected to be $14.15 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6 million shares of stock outstanding and investors require a return of 12 percent return on the company's stock. The corporate tax rate is 23 percent. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 12. What is your new estimate of the company's stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Share price $ 78.56 b. Share price $ 77.22
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
What are the four key building blocks of financial statement analysis? a. Liquidity and efficiency, solvency, profitability, and market b. Liquidity and efficiency, solvency, profitability, and...
-
A reverse-osmosis process is to be designed to handle a feed flow rate of 100gal/min. Three designs have been proposed, differing in the % recovery of potable water from the feed: Design 1: A single...
-
We need to use synchronous TDM and combine 20 digital sources, each of 100 Kbps. Each output slot carries 1 bit from each digital source, but one extra bit is added to each frame for synchronization....
-
The LIFO inventory reserve is a measure disclosed in a companys footnotes and reveals the difference between the current value of a companys ending inventory and the LIFO value of its ending...
-
Go to Deckers Outdoor Corporations latest annual report information on its Web site. Deckers Outdoor Corporation is the exclusive licensee for the manufacture of Teva footwear. Use the latest 10-K...
-
Austin Grocers recently reported the following 2021 income statement (in millions of dollars): Sales Operating costs including depreciation EBIT $700 500 $200 Interest 40 $160 40 EBT Taxes (25%) Net...
-
Income inequality has grown dramatically in the US over the past 4 decades. Is that a bad thing? Why/why not? What percentage of the US work force has enjoyed improved standards of living over the...
-
An insurance company has liabilities consisting of eleven annual payments of 1 million, with the first payment due to be made in 10 years' time and the last payment due to be made in 20 years' time....
-
On January 1 , Year 6 , Robertson Company created a fixed compensatory stock option plan for employees to acquire 1 8 , 0 0 0 shares of $ 3 par common stock for $ 2 2 a share. The options vest after...
-
At present, the two most popular VPN technologies are the traditional Internet Protocol Security (IPsec)-based VPNs, which function primarily at the network layer, and Secure Sockets Layer (SSL)...
-
Suppose that Bob's utility function is uB(qB,mB) = mB. (a) What is Bob's optimal consumption bundle if his income is Y, the price of qB is pq and the price of mg is 1. Ann's utility function is the...
-
that gives rise to the repeated integral, change the order of Sketch the region integration, and then evaluate. 16. Lo L = sin (11) dydx. 2
-
Describe 2 ways flexible workforce arrangements can be supported. (80 words)
-
The registrar of a college with a population of N = 4,000 full-time students is asked by the president to conduct a survey to measure satisfaction with the quality of life on campus. The following...
-
Find a maximal matching for the graph of Exercise 8.
-
Find a maximal matching for the graph of Exercise 9.
-
A sales manager must assign each of eight salespeople to one of eight different regions. He has asked the salespeople to rate their choice of regions in order, with 8 representing their most...
Study smarter with the SolutionInn App