Please show work step by step Chapter 13, problems 13-4, 13-6 (a,b), 13 -7 (a,b,c), 13-9 EROIC & MVA of Constant Growth Firm: 13-4. A company has capital of $200 million. It has an EROIC of 9%, forecasted constant growth of 5%, and a WACC of 10%. What is its value of operations? What is its intrinsic MVA? Value of Operations: 13-6. Brooks Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The company?s weighted average cost of capital is 12%. ? What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2). ? Calculate the value of Brooks?s operations. Corporate Valuation: 13-7. Dozier Corporation is a fast-growing supplier of office products. Analysis project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dozier?s weighted average cost of capital is WACC=13%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40 ? What is Dozier?s terminal, or horizontal, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted to Year 3). ? What is the current value of operations for Dozier? ? Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is the intrinsic price per share? Price per Share: 13-9.The balance sheet of Roop Industries is shown below. The 12/31/2010 value of operations is $651 million, and there are 10 million shares of common equity. What is the intrinsic price per share? Balance Sheet, December 31, 2010 (Millions of Dollars) Assets Liabilities and Equity Cash $20.0 Accounts payable $19.0 Marketable securities 47.0 Notes payable 65.0 Accounts receivable 100.0 Accruals 51.0 Inventories 200.0 Total current liabilities $135.0 Total current assets $367.0 Long-term bonds 131.0 Net plant and equipment 279.0 Preferred stock 33.0 Common stock (par plus PIC) 160.0 Retained earnings 187.0 Common equity $347.0 Total assets $646.0 Total liabilities and equity $646.0 Chapter 14, problems 14-2, 14-4, 14-5, 14-8. Residual Distribution Policy: 14-2. Petersen Company has a capital budget of $1.2 million. The company wants to maintain a target capital structure which is 60% debt and 40% equity. The company forecasts that is net income this year will be $600,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio? Stock Repurchase: 14-4. A firm has 10 million shares outstanding with a market price of $20 per share. The firm has $25 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What is the firm?s value of operations, and how many shares will remain after the repurchase? Stock Split: 14-5. Gamma Medical?s stock trades at $90 a share. The company is contemplating a 3-for-2 stock split. Assuming the stock split will have no effect on the total market value of its equity, what will be the company?s stock price following the stock split? Stock Split: 14-8. After a 5-for-1 stock split, the Strasburg Company paid a dividend of $0.75 per new share, which represents a 9% increase over last year?s pre-split dividend. What was last year?s dividend per share?
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