Computation of Valuations Models Section Use the following summary financial statement information and forecasts provided by TTU Value Metrics to answer the valuation questions in this section about Hi-Flyer Corp. which has a December 31 fiscal year end. (in thousands except per share data) Estimated Estimated 2008 2009 200,000 215,000 20,000 25,000 Estimated 2010 230,000 30,000 Net Income Total Dividends Paid Book Value of Equity Total Liabilities CFFO CFFI Dividends Per Share Shares Outstanding (12/31/07) Cost of Equity Cost of Debt WACC(at) Actual 2007 225,000 48,000 1,500,000 1,000,000 400,000 -250,000 0.48 100,000 0.14 0.08 0.11 150,000 -100,000 0.20 200,000 - 200,000 0.251 250,000 -200,000 0.30 31. Using the above forecasts, determine the intrinsic value of High Flyer shares. Use the discounted dividends model; assume the forecast dividend payment in 2011 is $0.35 and that it will growth by 8% per year in perpetuity. The appropriate intrinsic value is: $3.933 b. $4.024 C. $4.504 $4.508 $4.988 32. (Sensitivity Analysis). You know that dividend growth rates are estimated with error. In the previous problem, the dividend growth perpetuity was assumed to be 8% per year. What would be the impact on share price if the growth rate were assumed to be 3% (all other information remains the same). b. $1.30 lower $1.57 lower $1.79 lower $1.88 lower no impact d. 33. (Time Consistent Prices). Assume the valuation date is December 1, 2008 and that you computed a share price in Problem 31 of $2.00 per share. What is the time consistent price that would be compared with the observed price of $2.50. $2.112 $2.135 $2.231 $2.255 $2.280 (in thousands except per share data) Net Income Total Dividends Paid Book Value of Equity Total Liabilities CFFO CFFI Dividends Per Share Shares Outstanding (12/31/07)_ Cost of Equity Cost of Debt WACC(at) Actual Estimated Estimated Estimated 2007 2008 2009 2010 225,000 200,000 215,000 230,000 48,000 20,000 25,000 30,000 1,500,000 1,000,000 400,000 150,000/ 200,000 250,000 -250,000 -100,000 - 200,000 - 200,000 0.48 0.200. 250 .30 100,000/ 0.14 0.08 0.11 34. (Free Cash Flow Valuation). Assume that free cash flow to the firm is forecast to be $70,000 in 2011 and that it is expected to grow by 5% per year thereafter. The estimated intrinsic value per share is (12/31/07): a. -$1.87 b. $0.00 $0.816 $7.31 $8.13 Computation of Valuations Models Section Use the following summary financial statement information and forecasts provided by TTU Value Metrics to answer the valuation questions in this section about Hi-Flyer Corp. which has a December 31 fiscal year end. (in thousands except per share data) Estimated Estimated 2008 2009 200,000 215,000 20,000 25,000 Estimated 2010 230,000 30,000 Net Income Total Dividends Paid Book Value of Equity Total Liabilities CFFO CFFI Dividends Per Share Shares Outstanding (12/31/07) Cost of Equity Cost of Debt WACC(at) Actual 2007 225,000 48,000 1,500,000 1,000,000 400,000 -250,000 0.48 100,000 0.14 0.08 0.11 150,000 -100,000 0.20 200,000 - 200,000 0.251 250,000 -200,000 0.30 31. Using the above forecasts, determine the intrinsic value of High Flyer shares. Use the discounted dividends model; assume the forecast dividend payment in 2011 is $0.35 and that it will growth by 8% per year in perpetuity. The appropriate intrinsic value is: $3.933 b. $4.024 C. $4.504 $4.508 $4.988 32. (Sensitivity Analysis). You know that dividend growth rates are estimated with error. In the previous problem, the dividend growth perpetuity was assumed to be 8% per year. What would be the impact on share price if the growth rate were assumed to be 3% (all other information remains the same). b. $1.30 lower $1.57 lower $1.79 lower $1.88 lower no impact d. 33. (Time Consistent Prices). Assume the valuation date is December 1, 2008 and that you computed a share price in Problem 31 of $2.00 per share. What is the time consistent price that would be compared with the observed price of $2.50. $2.112 $2.135 $2.231 $2.255 $2.280 (in thousands except per share data) Net Income Total Dividends Paid Book Value of Equity Total Liabilities CFFO CFFI Dividends Per Share Shares Outstanding (12/31/07)_ Cost of Equity Cost of Debt WACC(at) Actual Estimated Estimated Estimated 2007 2008 2009 2010 225,000 200,000 215,000 230,000 48,000 20,000 25,000 30,000 1,500,000 1,000,000 400,000 150,000/ 200,000 250,000 -250,000 -100,000 - 200,000 - 200,000 0.48 0.200. 250 .30 100,000/ 0.14 0.08 0.11 34. (Free Cash Flow Valuation). Assume that free cash flow to the firm is forecast to be $70,000 in 2011 and that it is expected to grow by 5% per year thereafter. The estimated intrinsic value per share is (12/31/07): a. -$1.87 b. $0.00 $0.816 $7.31 $8.13
