2. Suppose that PWC is examining the value of Glory retail Company. The following table presents...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2. Suppose that PWC is examining the value of Glory retail Company. The following table presents forecasted financial data of the company: Items EBIT Depreciation Capital expenditure Net working capital Tax rate (average) 2022 9,200 3,300 5,200 3,180 30% 2023 9,850 3,600 5,730 3,330 30% 2024 12,420 3,900 6,610 4,060 30% Assume a discount rate of 10%. Currently, the company has a debt balance of 10,137 and 2000 shares. All values are in million AED, except the number of shares. Required: (a) If you assume that, the free cash flow will grow at a constant growth rate of 3% after 2024. (b) If the free cash flow in year 2024 is expected to remain constant for indefinite periods. (c) Suppose that the stock is currently trading at 12 Dirhams. Based on your solutions for (a) and (b), will you buy the stock today? 2. Suppose that PWC is examining the value of Glory retail Company. The following table presents forecasted financial data of the company: Items EBIT Depreciation Capital expenditure Net working capital Tax rate (average) 2022 9,200 3,300 5,200 3,180 30% 2023 9,850 3,600 5,730 3,330 30% 2024 12,420 3,900 6,610 4,060 30% Assume a discount rate of 10%. Currently, the company has a debt balance of 10,137 and 2000 shares. All values are in million AED, except the number of shares. Required: (a) If you assume that, the free cash flow will grow at a constant growth rate of 3% after 2024. (b) If the free cash flow in year 2024 is expected to remain constant for indefinite periods. (c) Suppose that the stock is currently trading at 12 Dirhams. Based on your solutions for (a) and (b), will you buy the stock today?
Expert Answer:
Answer rating: 100% (QA)
a To calculate the value of the company using a constant growth rate after 2024 we first need to cal... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
Students also viewed these finance questions
-
Assume a discount rate of 10 % What is the NPV of a machine investment today of $1.000.000 for a machine 1 that will generate net annual revenue of $300.000 for four years with a salvage value of...
-
You are preparing a free cash flow analysis for Jensen Corporation. The net working capital charge for year three of a five-year cash flow proforma is derived from? A. The difference in net working...
-
Firms free cash flow will equal $25 million during the coming year and will grow at an annual rate of 7% for the foreseeable future. If the firm has $200 million of debt and 10 million shares...
-
Muscles: Identify the name of the muscle, the origin, the insertion, and the action of the muscle labeled on the models. iliopsoas (psoas major and iliacus) gluteus maximus gluteus medius sartorius...
-
What are the important considerations (judgments) that determine what is included in an audit program?
-
Determine and accurately plot, on the same set of axes, the group delay and the phase delay for the systems with unit impulse responses: (a) h 1 (t) = 3e -5t u(t) (b) h 2 (t) = 5e -3t u (t) - 2e -5t...
-
There is a market for bets on the outcome of a coin toss. The possible outcomes are heads, tails, and edge. There are three assets traded in that market: Asset A pays \(\$ 1\) independent of the...
-
Review the chapter and make a list of all the advantages and disadvantages of matrix project organization you can find. Then add to the list any additional advantages or disadvantages that may have...
-
The Claussens are considering the purchase of a hardware store. The Claussens anticipate that the store will generate cash flows of $ 8 4 , 0 0 0 per year for 2 0 years. At the end of 2 0 years, they...
-
Step 1 Analyze Business Transactions (Accounting Cycle) Assume that you are the Financial Accountant of a newly started business from your chosen in August 2020: You are requested to assume the...
-
Sunshine Confectionary (a) It began trading on 1 October 2015 and had the following assets in use at 30th September 2020. Date of Purchase March 2018 Car -SCV 2900K $420,000 April 2018 Lorry YH 5567D...
-
Sheridan Supply Company's accounting records show the following at the year ending on December 31, 2025. Purchase Discounts $11300 Freight-In 15300 Purchases 702020 Beginning Inventory 49000 Ending...
-
Growth Rates Go to quote.yahoo.com and enter the ticker symbol IP for International Paper. When you get the quote, follow the Research link. What is the projected sales growth for International Paper...
-
Change in Net Working Capital Find the most recent abbreviated balance sheets for General Dynamics at finance.yahoo.com. Enter the ticker symbol GD, follow the Research link, and the Financials link....
-
Year 1 total cash dividends Year 2 total cash dividends Year 3 total cash dividends Year 4 total cash dividends $ 18,000 28,000 300,000 450,000 York's outstanding stock consists of 80,000 shares of...
-
Calculating Future Values Go to www.dinkytown.net and follow the Savings Calculator link. If you currently have $10,000 and invest this money at 9 percent, how much will you have in 30 years? Assume...
-
A vertical sluice gate (for which Cc = 0.61) is installed in a long, 2.0 m wide rectangular channel. A short, smooth hump 0.80 m high is installed a short distance downstream from the sluice gate....
-
A copper rod of length L =18.0 in is to be twisted by torques T (see figure) until the angle of rotation between the ends of the rod is 3.08. (a) If the allowable shear strain in the copper is 0.0006...
-
Hampton Manufacturing estimates that its WACC is 12% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to...
-
Part I of this case, presented in Chapter 3, discussed the situation of DLeon Inc., a regional snack foods producer, after an expansion program. DLeon had increased plant capacity and undertaken a...
-
Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.00 a share, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the...
-
a. For the allowed energies of a particle in a box to be large, should the box be very big or very small? Explain. b. Which is likely to have larger values for the allowed energies: an atom in a...
-
The molecules in the rods and cones in the eye are tuned to absorb photons of particular energies. The retinal molecule, like many molecules, is a long chain. Electrons can freely move along one...
-
What was the approximate activity of the plutonium source at the start of the mission? A. \(2 \times 10^{21} \mathrm{~Bq}\) B. \(2 \times 10^{19} \mathrm{~Bq}\) C. \(2 \times 10^{17} \mathrm{~Bq}\)...
Study smarter with the SolutionInn App