Question
Consider the following recent financial statements for the Philadelphia Pretzel Company: 2016 Income Statement Sales 2,000 COGS 1,500 EBIT 500 Interest expense 20 Taxable income
Consider the following recent financial statements for the Philadelphia Pretzel Company:
2016 Income Statement | |
Sales | 2,000 |
COGS | 1,500 |
EBIT | 500 |
Interest expense | 20 |
Taxable income | 480 |
Taxes | 192 |
Net Income | 288 |
2016 Balance Sheet |
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Cash | 0 |
| Accounts payable | 150 | |
Accounts receivable | 100 |
| Total current liabilities | 150 | |
Inventory | 200 |
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Total current assets | 300 |
| Long-term debt | 275 | |
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| Common stock | 100 | |
Fixed assets | 700 |
| Retained earnings | 475 | |
Total | 1000 |
| Total | 1000 | |
2016 Statement of Cash Flows | |
Operating activities: |
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Net Income | 288 |
Depreciation | 70 |
Change in accounts receivable | 30 |
Change in inventory | (60) |
Change in accounts payable | 20 |
Cash flow from operating activities | 348 |
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Investing activities: |
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Capital expenditures | (250) |
Cash flow from investing activities | (250) |
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Financing activities |
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Repayment of borrowing | (18) |
Cash flow from financing activities | (18) |
Assuming that the firms future cash flow will grow at 6% per year and their cost of capital is 16%, estimate the fair market value (i.e., the enterprise value) of PPC as of year-end 2016. (10 points)
Estimate PPCs stock price, if there are 200 shares outstanding. (2 points)
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