Assume the cost of equity is 10.18%; the dividend growth rate is 3.50% in the perpetuity and that WACC is 8.14%.  Use the income approach and value the shares of the subject company as at the end of 2019 using the discounted stream of dividend benefits method.  Round to the nearest whole cent (i.e. $12.9876 would be written as 12.99).  State on a per share basis.  Use the mid-year discounting rule and end of period discounting rule.  Assume the seed value to the perpetuity beginning in 2024 is a dividend of $2.14 per share.

 

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Period End: December 31 Net sales Cost of sales Gross margin Operating expenses: Research and development Selling, general and administrative Total operating expenses EBIT Less: Interest Expense Real other income (expense), net Income before provision for income taxes Provision for income taxes Net income Cash dividends declared per share $ $ Forecasts 2020 1 156,508 $ 87,846 68,662 3,381 10,040 13,421 55,241 566 (44) 55,763 14,030 41,733 $ $2.65 2021 2 170,910 $ 106,606 64,304 4,475 10,830 15,305 48,999 460 696 50,155 13,118 37,037 $ $1.64 2022 182,795 $ 112,258 70,537 6,041 11,993 18,034 52,503 815 165 53,483 13,973 39,510 $ $1.82 2023 4 233,715 140,089 93,626 8,067 14,329 22,396 73,248 733 (1,466) 72,515 19,121 53,394 $1.98 Perpetuity 2024 Period End: December 31 Net sales Cost of sales Gross margin Operating expenses: Research and development Selling, general and administrative Total operating expenses EBIT Less: Interest Expense Real other income (expense), net Income before provision for income taxes Provision for income taxes Net income Cash dividends declared per share $ $ Forecasts 2020 1 156,508 $ 87,846 68,662 3,381 10,040 13,421 55,241 566 (44) 55,763 14,030 41,733 $ $2.65 2021 2 170,910 $ 106,606 64,304 4,475 10,830 15,305 48,999 460 696 50,155 13,118 37,037 $ $1.64 2022 182,795 $ 112,258 70,537 6,041 11,993 18,034 52,503 815 165 53,483 13,973 39,510 $ $1.82 2023 4 233,715 140,089 93,626 8,067 14,329 22,396 73,248 733 (1,466) 72,515 19,121 53,394 $1.98 Perpetuity 2024

Answer rating: 100% (QA)

To value the shares of the subject company at the end of 2019 using the discounted stream of dividend benefits method we can use the following steps S... View the full answer