8:48 Your manager has asked you to determine an intrinsic value for Utica Manufacturing Company's stock....

 

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8:48 Your manager has asked you to determine an intrinsic value for Utica Manufacturing Company's stock. You have gathered the following information: Selected Financial Information Return on equity dividend payout rate Number of shares outstanding (millions) Most recent dividend (paid in Sept. 2020) $1.10 Market Capitalization rate Weighted Average Cost of Capital (WACC) 14 Kirowth Rate Starting in 2024 Balance Sheet (in millions) 0.15 40% Income Statement (in millions) 2019 2020 Revenue 826 905 Depreciation 19 22 Operating Costs 342 373 Earnings before Irenest and Taxes 465 510 Pmiered) N Earnings before Tax Taxes (40%) Net Income 100 Cart Libile Long-term Debt Total Liabilities 182 8 457 502 2019 2020 Current Assets 710 764 Net Property, Plant, and Equipment 3190 3,391 Total Assets 3909 4,185 201 274.2 301 228 323 1650 1650 187197 2031 2.215 3909 4.18 Shareholders equity Total Liabilities and Equity Capital Expenditures Use the information given to find the current growth rate. You expect the next 3 dividends to grow at this calculated rate. After that, in year 4, you expect Utica's growth rate to level out to 3% (year 2024). Using a two-stage dividend discount model (DDM) determine the intrinsic value of the stock today (2020). (4 marks) 19 201 b. Based on your research you believe Utica's FCFF will grow by the same rates as you solved for in part (a). Assume that all capital expenditures, depreciation, and working capital will also grow at these rates. Using the free cash flow to the firm method of valuation, what is the value of the firm today (2020)? *Note, this value may be quite different from (a) since it considers the value of debt as well. (5 marks) Continuing with the same assumptions as above, use the FCFE to find the value of the firm's equity per share. Assume interest and debt levels remain constant indefinitely. (4 marks) 8:48 Your manager has asked you to determine an intrinsic value for Utica Manufacturing Company's stock. You have gathered the following information: Selected Financial Information Return on equity dividend payout rate Number of shares outstanding (millions) Most recent dividend (paid in Sept. 2020) $1.10 Market Capitalization rate Weighted Average Cost of Capital (WACC) 14 Kirowth Rate Starting in 2024 Balance Sheet (in millions) 0.15 40% Income Statement (in millions) 2019 2020 Revenue 826 905 Depreciation 19 22 Operating Costs 342 373 Earnings before Irenest and Taxes 465 510 Pmiered) N Earnings before Tax Taxes (40%) Net Income 100 Cart Libile Long-term Debt Total Liabilities 182 8 457 502 2019 2020 Current Assets 710 764 Net Property, Plant, and Equipment 3190 3,391 Total Assets 3909 4,185 201 274.2 301 228 323 1650 1650 187197 2031 2.215 3909 4.18 Shareholders equity Total Liabilities and Equity Capital Expenditures Use the information given to find the current growth rate. You expect the next 3 dividends to grow at this calculated rate. After that, in year 4, you expect Utica's growth rate to level out to 3% (year 2024). Using a two-stage dividend discount model (DDM) determine the intrinsic value of the stock today (2020). (4 marks) 19 201 b. Based on your research you believe Utica's FCFF will grow by the same rates as you solved for in part (a). Assume that all capital expenditures, depreciation, and working capital will also grow at these rates. Using the free cash flow to the firm method of valuation, what is the value of the firm today (2020)? *Note, this value may be quite different from (a) since it considers the value of debt as well. (5 marks) Continuing with the same assumptions as above, use the FCFE to find the value of the firm's equity per share. Assume interest and debt levels remain constant indefinitely. (4 marks)

Answer rating: 100% (QA)

you expect Uticas growth rate to level out to 3 year 2024 Using a twostage dividend discount model DDM determine the intrinsic value of the stock toda... View the full answer