1. Calculatethepershare valueofABCfirmusingthefollowing information: Year 0salespershare is 75$ Salesgrowatarateof10% annuallyfor3yearsand5%annuallythereafter. Netprofitmargin is15% ofsales forever Netinvestmentinfixedcapital(netofdepreciation)is40%ofthesalesincrease AnnualincreaseinWCis30%ofthesales increase Debt financingis60%of the...
1. Calculate the per share value of ABC firm using the following information:
- Year 0 sales per share is 75$
- Sales grow at a rate of 10% annually for 3 years and 5% annually thereafter.
- Net profit margin is 15% of sales for ever
- Net investment in fixed capital(net of depreciation) is 40% of the sales increase
- Annual increase in WC is 30% of the sales increase
- Debt financing is 60% of the net investments in capital equipment and working capital
- ABC beta is 1.5, risk free rate of return is 8%, equity premium is 5%
2. Calculate the per share value of XYZ firm using the following information:
- Year 0 EPS is $5
- EPS will increase at the following declining growth rates over the next 5 years: 35%, 20%, 15%, 11%, 9%
- Net investment in fixed capital (net of depreciation) per share are as follows:4.00, 3.50, 2.00, 1.00, 0.5
- Net investment in WC each year will be 40% of the net investment in fixed capital
- 40% of the net investment in fixed capital and WC will be financed by new debt financing
- Current market conditions dictate a risk free rate of8%, an equity risk premium of 6%, and a beta of 1.6 for XYZ
3. The following financial statements and additional information belong to ABC Company.
ABC's Balance Sheets(Millions of Dollars)
Cash and equivalents
Total current assets
Net fixed assets
Liabilities and equity
Current portion of long term debt
Total current liabilities
Total liabilities and equity
ABC's Income Statement (Millions of Dollars)
Cost of goods sold (Excluding depr. & amort.)
Depreciation and amortization
Other operating expenses
Total operating costs
Earnings before interest and taxes (EBIT)
Weighted average cost of capital (WACC)
Shares outstanding (millions)
Calculate the 2021 FCFF for ABC Company
- We assume that the FCFF is expected to grow forever at 5%, calculate the firm value
- Calculate the value of Equity knowing that the market value of debt is 1 million $.
- What is the value per share using FCFF approach?