All information below is what has been provided. The rest needs to be calculated.

Aldorado Company is a wholesale aluminum distributor which purchases aluminum in carload lots and sells to several thousand aluminum users. The nature of the aluminum business requires that the company maintain large inventories to take care of customer requirements in the event of strikes or other delays. Assume that Aldorado Company is put for sale at the end of the current year, assumed today. What should be the fair market value (FMV) for Aldorado?
In examining records from for the past twenty years, the company found consistent relationships among the following accounts as a percent of sales:
Sales	100% of Sales
Current Assets	22% of Sales
Net fixed Assets	65% if Sales $110 million; 70% otherwise
Accounts Payable	10% of Sales
Other Current Liabilities	5% of Sales
Profit Margin (=NI/Sales)	16% of Sales
Interest Rate	7%
Tax Rate	21%
Number of shares outstanding	2,000,000
Market price per share today	$65
The companys sales for the current year were $90 million. The company expects to grow by $9 million per year over the next 5 years (year 1-year 5). The company wants to project its financial statements, financial ratios and financing requirements for each of the next 5 years, assuming that the projected sales levels are achieved. Assume further that the company pays out 60 percent of earnings as dividends.
QUESTIONS (ALL OF THEM NEEDED)
1. (30 Points) Construct proforma balance sheets for the end of each of the next 5 years (year 1-year 5), assuming that external capital needs are financed 40 percent by issuing new long-term debt, and 60 percent by selling new common stock.
2. (15 Points) Using the book values information in your answer to question (1), - Calculate the following ratios: return on equity (ROE), return on assets (ROA), return on capital (ROC), economic value added (EVA), operating profit margin (OPM), assets turnover (TAT), long-term debt (LTD) ratio, long-term debt-equity (D/E) ratio, total debt (TD)ratio, times interest earned ratio (TIE), net working capital to total assets, current ratio (CR), and sustainable growth rate. Note: all ratios formulas are shown in Table 2. - Conduct a trend analysis for the calculated ratios over the next 5 years. - Comment on each ratio.
3. (15 Points) Using the information in your answer to question (1), calculate net cash flows (NCF) at the end of each of the next five years (including terminal value at the end of year 5). Assume that all fixed assets are depreciated using the straight line method. Note that additional capital expenditures are equal to changes in fixed assets from one year to another. Note: NCF = EBIT Taxes + Depreciation (+ or ) Changes in NWC (+ or ) Additional Capital Expenditures. This is CFFA.
4. (15 Points) Using the DCF method, what is the NPV for Aldorado? Here are some hints: - Use the NCF calculated in question (3) as your net cash flows for each of the next 5 years. - Assume that the risk free rate is 5.6%, required market rate of return is 11.6%, and Aldorado (assets) beta is 1.4. Assume that RADR (i.e., WACC) will remain constant for the next five years. - Use Gordon model (V=CF1/r-g) to calculate the terminal value of Aldorado at the end of this year; i.e., today. For that, assume a permanent constant growth rate in NCF of 4% starting year 1. - Calculate Aldorado NPV. Assume initial investment equals to book value of total assets minus current liabilities at the end of the current year.
5. (5 Points) What is the IRR for Aldorado? Is this IRR acceptable? Hint: use Tables 4 and 5 in the attached EXCEL sheet to answer questions 4 & 5.
6. (5 Points) Calculate the new price per share as a result of your NPV calculations in question (4).
7. (5 Points) Calculate the change in the acquirers wealth as a result of the acquisition. Assume the acquirer of Aldorado will pay exactly the price as observed in the market at the end of this year. Would you recommend this acquisition? Hint: use Tables 6 and 7 in the attached EXCEL sheet to answer questions 6 & 7.
8. (15 Points) Calculate the weighted average cost of capital for each of the next 5 years. Also, comment on changes in WACC during the same period. Is there an optimal (minimal) WACC? Hints: WACC = Wd*Kd*(1-Tc) + We KeL Where, Wd = Long Term Debt/(Total Equity + LTD*(1-Tc) We = Total Equity/(Total Equity + LTD*(1-Tc) After Tax LTD = LTD*(1-Tc) After Tax D/E Ratio = After Tax LTD / Total Equity Assume Beta of Debt (d) = 0.07 and it remains constant throughout the next five years regardless of the change in leverage Unlevered Cost of Equity (KeU) = 1.41 and it remains constant throughout the next five years Levered Cost of Equity (KeL) = 1.70 in year 1, and it will change with the change in debt ==> Equity Beta (eL) = eU + [(eU - d)*(1-Tc)*D/E)] Use CAPM to calculate cost of equity (KeL)
9. (10 Points) What is the optimal capital structure mix for Aldorado? Toward this end: - Calculate the value of the levered firm Aldorado and share price for each of the next 5 years. - Comment on changes in firm value and share price during the same period. Is there an optimal (maximal) value? - Compare the above results to the changes in WACC as calculated in question 8. Can you reconcile the discrepancy? Hint: the firm value is the NPV of the firm as calculated in question 4.
10. (5 Points) Calculate the new number of outstanding shares and new book value per share for each of the next 5 years (year 1-year 5). Hint 1: the increase in outstanding shares = increase in common stock account divided by last year share price.

Year 0 Info (In Thousands $) ----> Sales = 90,000 / CA = 19,800 / NFA = 58,500 / TA = 78,300 / AC Pay = 9,000 / Other CL = 4,500 / TCL = 13,500 / L/TD = 16,000 / Common Stock = 28,800 / RE = 20,000 / Total Liabilities and Equity = 78,300 / Interest (7% borrowing rate) = 1120 / Dep = 20% of FA

Beta of Debt = 0.07 (all years) / Beta of unlevered equity = 1.41 (all years) / Beta of levered equity = 1.7 (Y0) / WACC = 0.14 (Y0) / Adjusted share price = 65$ (Y0) / # of Shares Outstanding = 2000 (Y0 (In thousands))