Final Valuation Case

Attached is a spreadsheet showing the most recent financial statements for Wall Enterprises. Please do your calculations on the spreadsheet, with proper formulas.

Using the percent of sales method forecast the financial statements for the next three years. Sales are anticipated to grow by 10%, 8%, and 5% thereafter. The WACC is 9%. Balance the balance sheets by using the Line of Credit or adding a Marketable Securities line if needed. The interest rate on all debt is 8% and is based on the debt outstanding at the end of the prior year. Dividends are forecast to grow by 10% each year. No additional long-term debt or commons stock will be sold. Make a note of anything you assumed in your forecast.

Calculate the FCF and the terminal value to determine the value of the company.

Given the 10 million shares outstanding what is the implied stock price?

If an investor is willing to pay $250 million for 25% of the company, assuming a terminal value of 8X EBIT in 2019, (ignore the DCF calculations you just did) what return on investment does that provide? Is that likely to be an acceptable investment to the investor?

Final Valuation Case Wall Enterprises Balance Sheet 12131116 2016 Cash Accounts receivable Inventory Total Current Assets Net fixed Assets Total Assets 400 700 500 1.200 Accou Line of credit Total Current Liabilites Long-term Debt Total Liabilites Common Stock Retained Earnings Total Stockholders Equity nts payable 500 580 420 200 620 1.200 Totl Liabilites and Equit Income Statement Year Ending 2016 (In millions) Sales Operating Costs Depreciation EBIT Interest EBT Taxes(40%) Net Income 2,000 1800 150 40 110 Addition toRE Common Share:s 46