Question: Start with the partial model in the file Ch09 P11 Build a Model.xlsx on the textbook's Web site, which contains Henley Corporation's most recent financial

Start with the partial model in the file Ch09 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.

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? Do you think that the company will have a value of operations greater than its total net operating capital?
d. Calculate the current value of operations. How does the current value of operations compare with the current amount of total net operating capital?
e. Calculate the price per share of common equity as of 12/31/2015.

Projected Actual 2131 2/31 12/31/ 12131 12/31/ 2015 2016 2017 2018 2019 15% 72 10 10% 72 10 6% 72 10 Sales growth rate 72 10 10 Accounts receivable/Sales10 20 75 10 20 Net PPE/Sales 75 75 75 75 Accounts payable/Sales Tax rate 10.5 10.5 10.5 Weighted average cost of capital (WACC) 10.5 10.5

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Income Statement for the Year Ending December 31 Millions of Dollars 2015 Net Sales 8000 Costs except depreciation 5760 Depreciation 600 Total operating costs 6360 Earning before int tax 1640 Less int... View full answer

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