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BA 731 Take-home Portion of Midterm Exam Solution........................




Question;Suppose today is January 1, 2012. Using the financial statements below prepare budgeted financial statements for2012, 2013, 2014 & 2015. In 2011 dividend payout ratio was 50.36%. Assume that except tax rate all other items inthe financial statements will grow by percentage sales growth. Company's sale revenue is expected to grow at therate of 7%. Compute free cash flow (FCF) for all the forecasted years. Assume that FCF is forecasted to grow at 4%after 2015 forever. The WACC is 10% and there are 10 million shares outstanding.a. Calculate the value of operations as of today. (5 pts.)b. What is the intrinsic value of the stock price? (10 pts)c. Find the additional fund needed (AFN) for 2012. (5 pts)(Note: You must show forecasted financial statement with the solutions)XYZ INCIncome Statement2011SalesCostsDepreciationEBITInterestEarnings Before TaxesTaxes (At 35%)Net Income$350.00$252.00$26.30$71.70$10.60$61.10$21.39$39.72XYZX INCBalance Sheet(In millions)2011AssetsCashMarketable SecuritiesAccounts ReceivableInventoryTotal Current AssetsNet Plant & EquipmentTotal Assets21.5333570159.5347.4506.92011Current Liabilities & EquityAccounts PayableAccrualsNotes PayableTotal Current LiabilitiesLong-Term DebtPreferred stockCommon StockRetained EarningsTotal Liab. and Owners' Equity6.318.251.275.7125.818223.763.7506.9


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