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Posted on Jul 24, 2024

Clipboard Font Alignment Number H86 B D E G H 1 Mini Case Data 2 3 Figure 9-MC-1. Financial Statements and Other Data (Millions except

Clipboard Font Alignment Number H86 B D E G H 1 Mini Case Data 2 3 Figure 9-MC-1. Financial Statements and Other Data (Millions except per share data) 4 Hatfield Medical Supply: Balance Sheet (Millions of Dollars), 12/31/2018 Hatfield Medical Supply: Income Statement (Millions of Dollars 5 Except per Share) 6 2018 7 Cash $20 Sales $2,000.0 8 Aucts. rec. $280 Op. costs (excl. depr.) $1,800.0 9 Inventories $400 Depreciation $50.0 10 Total CA $700 EBIT $150.0 11 Net fixed assets $500 Interest $40.0 12 Total assets $1,200 Pretax earnings $110.0 13 Taxes (40%) $44.0 14 Aucts.pay. & accruals $80 Net Income $66.0 15 Line of credit $0 16 Total $80 Dividends $20.0 17 Long term debt $500 Add. to RE $46.0 18 Total liabilities $580 Common shares 10.0 19 Common stock $420 EPS $6.6 20 Retained earning $200 DPS $2.0 21 Totalcommon equ. $620 Ending stock price 22 Total liah & equity $52.80 $1,200 23 24 25 Additional Data 2019 26 Exp. Sales growth rate 10% 27 Interest rate on LT debt 8% 28 Target WACC 9% 29 30 Use the following assumptions to answer the following questions: (1) Operating ratios remain unchanged. (2) Sales will grow by 10%, 8%, 5%, and 5% for the next 31 4 years. 3) The target weighted average cost of capital (WACC) is 9%. 32 (1) For each of the next 4 years, forecast the following items: sales, cash, accounts receivable, inventories, net fixed assets, accounts payable and accruals, 33 operating costs (excluding depreciation), depreciation, and earnings before interest and taxes (EBIT) 34 2) Using the previously forecasted items, calculate for each of the next 4 years the net operating profit after taxes (NOPAT), net operating working capital, total operating capital, free cash flow (FC), annual growth rate in FCF, and return on invested capital. What does the forecasted free cash flow in the first year imply 35 about the need for external financing? Compare the forecasted ROIC with the WACC. What does this imply abot how well the company is performing? Mini Case Data Ready B D E G 36 (3) Assume that FCF will continue to grow at the growth rate for the last year in the forecast horizon. (Hint:.) What is the horizon value at 2022? What is the present value of the horizon value? What is the present value of the forecasted FCF? (Hint: Use the free cash flows for 2019 through 2022.) What is the current 37 value of operations? Using information from the 2016 financial statements, what is the current estimated intrinsic stock price? 2018 2019 2020 2021 2022 2018 2019 10% 2020 BX 2021 5% 2022 5% 38 39 40 41 Op.costs/Sales 42 Depr/FA 43 Cash/Sales 44 Receivables/Sales 45 Inventories/Sales 46 (Fixed assets/Sales 47 Acc. pay. & acc./ Sales 48 Tax rate 49 SO 51 52 53 54 Sale Forecast SS Sales Growth 56 Net les 57 Operating Assets and Operating Llabilities S8 Cash 59 Accounts receivable 60 Inventories 61 Net PPE 62 Accounts payable & Accruals 63 Operating Income 64 COGS (end. depr.) 65 Depreciation 66 Other operating expenses 67 Cost of strategic initiatives 66 EBIT - Sales - COGS - Depre.- Oper.Expense 69 Net operating profit after taxes (NOPAT)-EBIT (1-0) 70 Free Cash Flows 71 Net operating working capital Operting CA Operating a 72 Total net operating capital - Net Operating WC.Net FA 73 FCF - NOPAT-A net op capital 74 Estimated Intrinske Value Mini Case Data Ready $2,000 $20 $280 $400 $500 $80 $1,800 $SO $0 $0 $150 $150 $620 $1,180 B G 2018 2019 10% 2020 8% 2021 5% 2022 5% $2,000 41 Op. costs/Sales 42 Depr./FA 43 Cash/Sales 44 Receivables/Sales 45 Inventories/Sales 46 (Fleed assets/Sales 47 Acc. pay. & accr,/ Sales 48 Tax rate 49 50 51 52 53 54 Sales Forecast 55 Sales Growth 56 Net sales 57 Operating Assets and Operating Liabilities 58 Cash 59 Accounts receivable 50 Inventories 51 Net PP&E 52 Accounts payable & Accruals 53 Operating Income COGS (excl. depr.) Depreciation 6 Other operating expenses 7 Cost of strategic Initiatives -8 EBIT -Sales- COGS - Depre. - Oper. Expense 9 Net operating profit after tanes (NOPAD-EBIT (1-1) o Free Cash Flows 1 Net operating working capital-Operting CA - Operating a 2 Total net operating capital - Net Operating WC.Net FA 3 FCF - NOPAT - A net op capital 4 Estimated Intrinsic Value 5 Target WACC 6 ROIC NOPAT/(Total op. cap) 7 REF: HV2072 FC(115) (WACC - $20 $280 $100 $500 S80 $1,800 SSO SO SO S150 $150 620 $1.180 Value of Operations (12/31/2018) Present value of HV Present value of ECE Value of operations Estimated intrinsic stock price (12/31/2018) Value of operations + ST Investments Estimated total intrinsic value -All debt - Preferred stock Estimated intrinsic value of equity + Number of shares Estimate intrinsic stock price Mini Case Data Clipboard Font Alignment Number H86 B D E G H 1 Mini Case Data 2 3 Figure 9-MC-1. Financial Statements and Other Data (Millions except per share data) 4 Hatfield Medical Supply: Balance Sheet (Millions of Dollars), 12/31/2018 Hatfield Medical Supply: Income Statement (Millions of Dollars 5 Except per Share) 6 2018 7 Cash $20 Sales $2,000.0 8 Aucts. rec. $280 Op. costs (excl. depr.) $1,800.0 9 Inventories $400 Depreciation $50.0 10 Total CA $700 EBIT $150.0 11 Net fixed assets $500 Interest $40.0 12 Total assets $1,200 Pretax earnings $110.0 13 Taxes (40%) $44.0 14 Aucts.pay. & accruals $80 Net Income $66.0 15 Line of credit $0 16 Total $80 Dividends $20.0 17 Long term debt $500 Add. to RE $46.0 18 Total liabilities $580 Common shares 10.0 19 Common stock $420 EPS $6.6 20 Retained earning $200 DPS $2.0 21 Totalcommon equ. $620 Ending stock price 22 Total liah & equity $52.80 $1,200 23 24 25 Additional Data 2019 26 Exp. Sales growth rate 10% 27 Interest rate on LT debt 8% 28 Target WACC 9% 29 30 Use the following assumptions to answer the following questions: (1) Operating ratios remain unchanged. (2) Sales will grow by 10%, 8%, 5%, and 5% for the next 31 4 years. 3) The target weighted average cost of capital (WACC) is 9%. 32 (1) For each of the next 4 years, forecast the following items: sales, cash, accounts receivable, inventories, net fixed assets, accounts payable and accruals, 33 operating costs (excluding depreciation), depreciation, and earnings before interest and taxes (EBIT) 34 2) Using the previously forecasted items, calculate for each of the next 4 years the net operating profit after taxes (NOPAT), net operating working capital, total operating capital, free cash flow (FC), annual growth rate in FCF, and return on invested capital. What does the forecasted free cash flow in the first year imply 35 about the need for external financing? Compare the forecasted ROIC with the WACC. What does this imply abot how well the company is performing? Mini Case Data Ready B D E G 36 (3) Assume that FCF will continue to grow at the growth rate for the last year in the forecast horizon. (Hint:.) What is the horizon value at 2022? What is the present value of the horizon value? What is the present value of the forecasted FCF? (Hint: Use the free cash flows for 2019 through 2022.) What is the current 37 value of operations? Using information from the 2016 financial statements, what is the current estimated intrinsic stock price? 2018 2019 2020 2021 2022 2018 2019 10% 2020 BX 2021 5% 2022 5% 38 39 40 41 Op.costs/Sales 42 Depr/FA 43 Cash/Sales 44 Receivables/Sales 45 Inventories/Sales 46 (Fixed assets/Sales 47 Acc. pay. & acc./ Sales 48 Tax rate 49 SO 51 52 53 54 Sale Forecast SS Sales Growth 56 Net les 57 Operating Assets and Operating Llabilities S8 Cash 59 Accounts receivable 60 Inventories 61 Net PPE 62 Accounts payable & Accruals 63 Operating Income 64 COGS (end. depr.) 65 Depreciation 66 Other operating expenses 67 Cost of strategic initiatives 66 EBIT - Sales - COGS - Depre.- Oper.Expense 69 Net operating profit after taxes (NOPAT)-EBIT (1-0) 70 Free Cash Flows 71 Net operating working capital Operting CA Operating a 72 Total net operating capital - Net Operating WC.Net FA 73 FCF - NOPAT-A net op capital 74 Estimated Intrinske Value Mini Case Data Ready $2,000 $20 $280 $400 $500 $80 $1,800 $SO $0 $0 $150 $150 $620 $1,180 B G 2018 2019 10% 2020 8% 2021 5% 2022 5% $2,000 41 Op. costs/Sales 42 Depr./FA 43 Cash/Sales 44 Receivables/Sales 45 Inventories/Sales 46 (Fleed assets/Sales 47 Acc. pay. & accr,/ Sales 48 Tax rate 49 50 51 52 53 54 Sales Forecast 55 Sales Growth 56 Net sales 57 Operating Assets and Operating Liabilities 58 Cash 59 Accounts receivable 50 Inventories 51 Net PP&E 52 Accounts payable & Accruals 53 Operating Income COGS (excl. depr.) Depreciation 6 Other operating expenses 7 Cost of strategic Initiatives -8 EBIT -Sales- COGS - Depre. - Oper. Expense 9 Net operating profit after tanes (NOPAD-EBIT (1-1) o Free Cash Flows 1 Net operating working capital-Operting CA - Operating a 2 Total net operating capital - Net Operating WC.Net FA 3 FCF - NOPAT - A net op capital 4 Estimated Intrinsic Value 5 Target WACC 6 ROIC NOPAT/(Total op. cap) 7 REF: HV2072 FC(115) (WACC - $20 $280 $100 $500 S80 $1,800 SSO SO SO S150 $150 620 $1.180 Value of Operations (12/31/2018) Present value of HV Present value of ECE Value of operations Estimated intrinsic stock price (12/31/2018) Value of operations + ST Investments Estimated total intrinsic value -All debt - Preferred stock Estimated intrinsic value of equity + Number of shares Estimate intrinsic stock price Mini Case Data