Based on the projection below of the implied value of the companys stock and given its current stock price of $88.88, would you be inclined to recommend purchasing or selling the companys stock?

Based on the new projection below of the implied value of the companys stock and given its current stock price of $88.88, would you be inclined to recommend purchasing or selling the companys stock?

Besides projecting the future financial statements for the company, the current ratio, quick ratio, debt ratio, interest coverage ratio, and Altman Z-score should be calculated based on the historical 2019 data and then again based on the projected 2020 data. Comment on whether these expected changes in ratios would be viewed favorably or unfavorably to current and/or potential creditors of the company, and why

Valuation Assumptions NOPAT as percentage of sales (historical) Tax-rate adjusted NOPAT as percentage of sales NOPAT as percentage of sales (assumed) NOA as percentage of sales (historical) NOA as percentage of sales (assumed) Historical growth rate in sales Assumed initial growth rate in sales Assumed number of years of initial growth rate Assumed long-term growth rate in sales Weighted average cost of capital 11.89% 11.08% 11.89% 5.90% 5.75% 7.24% 8.50% 2.50% 6.25% Time period 3 8.50% Expected sales growth rate Projected sales Projected NOPAT Projected NOA Projected change in NOA Projected free cash flow Terminal value Present value of free cash flows Total PV of all future cash flows + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) 8.50% $28,761.8 $3,420.3 $1,653.8 $90.9 $3,329.4 0.9412 $3,133.5 2 8.50% $31,206.6 $3,711.0 $1,794.4 $140.6 $3,570.4 0.8858 $3,162.7 4 8.50% $36,737.2 $4,368.7 $2,112.4 $165.5 $4,203.2 0.7847 $4,026.4 $1,946.9 $152.5 $3,873.9 0.8337 $3,229.7 5 8.50% $39,859.8 $4,740.0 $2,291.9 $179.6 $4,560.5 0.7385 $3,367.9 $110,744.8 3,373.1 $114,117.9 (11,167.0) $102,950.9 1.181.0 $87.17 Mid-year adjustment Total PV of all future cash flows Adjustment factor x/(1+WACC) Adjusted amount + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) $110,744.8 1.0308 $114,153.1 3.373.1 $117,526.2 (11.167.0) $106,359.2 1,181.0 $90.06 Revised Valuation Assumptions NOPAT as percentage of sales (historical) Tax-rate adjusted NOPAT as percentage of sales NOPAT as percentage of sales (assumed) NOA as percentage of sales (historical) NOA as percentage of sales (assumed) Historical growth rate in sales Assumed initial growth rate in sales Assumed number of years of initial growth rate Assumed long-term growth rate in sales Weighted average cost of capital 11.89% 11.08% 11.89% 5.90% 5.75% 7.24% 8.50% 2.50% 12.15% Time period Expected sales growth rate Projected sales Projected NOPAT Projected NOA Projected change in NOA Projected free cash flow Terminal value Present value of free cash flows Total PV of all future cash flows + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) 8.50% $28,761.8 $3,420.3 $1.653.8 $90.9 $3,329.4 0.8917 $3,133.5 2 8.50% $31,206.6 $3,711.0 $1,794.4 $140.6 $3,570.4 0.7951 $3,162.7 3 8.50% $33,859.1 $4,026.4 $1.946.9 $152.5 $3,873.9 0.7089 $3,229.7 8.50% $36,737.2 $4,368.7 $2.112.4 $165.5 $4,203.2 0.6321 $3.298.1 8.50% $39,859.8 $4,740.0 $2,291.9 $179.6 $4,560.5 0.5636 $3,367.9 6 8.50% $43,247.9 $5,142.9 $2,486.8 $194.8 $4.948.1 0.5026 $3,439.3 7 8.50% $46,924.0 $5,580.1 $2,698.1 $211.4 $5,368.7 0.4730 $3,512.1 8.50% $50,912.5 $6,054.4 $2.927.5 S229.3 $5,825.0 0.4452 $3,586.5 $52,123.0 3.373.1 $55.496.1 (11.167.0) $44.329.1 1 1810 $37.54 Mid-year adjustment Total PV of all future cash flows Adjustment factor XV(1+WACC) Adjusted amount + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) $52,123.0 1.0590 $55.198.7 3.373.1 $58,571.8 (11.167.0) S47,404.8 1 1810 $40 14 Historical and Pro Forma Financial Ratios Current ratio Current 0.92 0.59 58.10% 11.83 5.49 Forecasted 0.39 0.25 49.84% 11.89 4.26 0.39 0.25 49.84% 9.90 4.26 Debt ratio Interest coverage ratio Altman-Z score Adjusted 0.39 0.25 50.00% 9.84 4.25 0.39 0.25 50.00% 9.84 4.25 Valuation Assumptions NOPAT as percentage of sales (historical) Tax-rate adjusted NOPAT as percentage of sales NOPAT as percentage of sales (assumed) NOA as percentage of sales (historical) NOA as percentage of sales (assumed) Historical growth rate in sales Assumed initial growth rate in sales Assumed number of years of initial growth rate Assumed long-term growth rate in sales Weighted average cost of capital 11.89% 11.08% 11.89% 5.90% 5.75% 7.24% 8.50% 2.50% 6.25% Time period 3 8.50% Expected sales growth rate Projected sales Projected NOPAT Projected NOA Projected change in NOA Projected free cash flow Terminal value Present value of free cash flows Total PV of all future cash flows + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) 8.50% $28,761.8 $3,420.3 $1,653.8 $90.9 $3,329.4 0.9412 $3,133.5 2 8.50% $31,206.6 $3,711.0 $1,794.4 $140.6 $3,570.4 0.8858 $3,162.7 4 8.50% $36,737.2 $4,368.7 $2,112.4 $165.5 $4,203.2 0.7847 $4,026.4 $1,946.9 $152.5 $3,873.9 0.8337 $3,229.7 5 8.50% $39,859.8 $4,740.0 $2,291.9 $179.6 $4,560.5 0.7385 $3,367.9 $110,744.8 3,373.1 $114,117.9 (11,167.0) $102,950.9 1.181.0 $87.17 Mid-year adjustment Total PV of all future cash flows Adjustment factor x/(1+WACC) Adjusted amount + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) $110,744.8 1.0308 $114,153.1 3.373.1 $117,526.2 (11.167.0) $106,359.2 1,181.0 $90.06 Revised Valuation Assumptions NOPAT as percentage of sales (historical) Tax-rate adjusted NOPAT as percentage of sales NOPAT as percentage of sales (assumed) NOA as percentage of sales (historical) NOA as percentage of sales (assumed) Historical growth rate in sales Assumed initial growth rate in sales Assumed number of years of initial growth rate Assumed long-term growth rate in sales Weighted average cost of capital 11.89% 11.08% 11.89% 5.90% 5.75% 7.24% 8.50% 2.50% 12.15% Time period Expected sales growth rate Projected sales Projected NOPAT Projected NOA Projected change in NOA Projected free cash flow Terminal value Present value of free cash flows Total PV of all future cash flows + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) 8.50% $28,761.8 $3,420.3 $1.653.8 $90.9 $3,329.4 0.8917 $3,133.5 2 8.50% $31,206.6 $3,711.0 $1,794.4 $140.6 $3,570.4 0.7951 $3,162.7 3 8.50% $33,859.1 $4,026.4 $1.946.9 $152.5 $3,873.9 0.7089 $3,229.7 8.50% $36,737.2 $4,368.7 $2.112.4 $165.5 $4,203.2 0.6321 $3.298.1 8.50% $39,859.8 $4,740.0 $2,291.9 $179.6 $4,560.5 0.5636 $3,367.9 6 8.50% $43,247.9 $5,142.9 $2,486.8 $194.8 $4.948.1 0.5026 $3,439.3 7 8.50% $46,924.0 $5,580.1 $2,698.1 $211.4 $5,368.7 0.4730 $3,512.1 8.50% $50,912.5 $6,054.4 $2.927.5 S229.3 $5,825.0 0.4452 $3,586.5 $52,123.0 3.373.1 $55.496.1 (11.167.0) $44.329.1 1 1810 $37.54 Mid-year adjustment Total PV of all future cash flows Adjustment factor XV(1+WACC) Adjusted amount + Nonoperating assets Value of firm - Nonoperating liabilities Firm equity value + Shares outstanding Implied value of stock (per share) $52,123.0 1.0590 $55.198.7 3.373.1 $58,571.8 (11.167.0) S47,404.8 1 1810 $40 14 Historical and Pro Forma Financial Ratios Current ratio Current 0.92 0.59 58.10% 11.83 5.49 Forecasted 0.39 0.25 49.84% 11.89 4.26 0.39 0.25 49.84% 9.90 4.26 Debt ratio Interest coverage ratio Altman-Z score Adjusted 0.39 0.25 50.00% 9.84 4.25 0.39 0.25 50.00% 9.84 4.25