Corporation A. Stockholders' Equity Questions:
i. Calculate the average stock return from 20X1-20X3.
ii. Calculate the standard deviation over this same period.
iii. Calculate the coefficient of variation over this period.
iv. Assume that the CAPM holds, the Corporation has a beta of 1.50, and the 30-year U.S. Treasury bonds sell at an 8% yield. Using the CAPM, calculate Corporation A's required rate of return.
v. Calculate the dollar amount of dividends that were declared during 20X3.
vi. Calculate the (intrinsic) value of Corporation A's stock price at yearend 20X3 using the dividend growth model.
vii. Compare the intrinsic value to the market value of the Corporation A. Explain the difference.
BI E Merge & Center $ ~ % Conditional Format as Insert ormat 2x A y Formatting Table * Styles Clear * oard Font Alignment Number Styles Cells Edi Ire 1 X A B C E F G H J K L M N P Q Corporation A Comparative Statements of Cash Flow For the 12 Months Ended December 31 20X3 20X2 For the 12 Months Ended December 31 Cash received from customers 3,960.000 3,375,000 For the 12 Months Ended December 31 20X3 20X2 Cash paid to suppliers (2,470,000 (2,036,000) Cash received from customers $ 3,938.484 $ 3,335,116 Cash paid to suppliers -2.470,000 -2,022,000 Cash paid for salaries and wages (646,000) (831,000 Cash paid for salaries and wages -646,000 -831,000 Cash paid for insurance (114,000 (99,000 Cash paid for insurance -114,000 -93,000 -145,556 -129,709 (60,000; (60,000) Cash paid for income taxes Cash paid for interest-Bonds Cash paid for interest-Bonds -60,000 -60,000 Cash paid for interest-Notes Payable (76,911, (69,591) Cash paid for interest-Notes Payable -52.740 -66,946 Net Cash from Operating $ 450,188 $ 126,461 Net Cash from Operating 593,089 279.409 Investment in Land -300,000 -1,420,000 -640,000 Investment in Land (300,000; (1,420,000) Investment in Building -930,000 Sale of Building 343,000 287,000 Investment in Building (930,000, (640,000) Sale of Land 277,000 1,233,000 Sale of Building 343,000 287,0006 Net Cash from Investing $(610,000) # (540,000) 32.188 28,539 Sale of Land 277,000 1,233,000 Proceeds (Payment) Notes Payable iPurchase) Sale Treasury Stock 330,000 -440,000 Dividends Paid -48.000 -25,000 Net Cash from Investing (610,000; (540,000 Cash from Financing Activities $(410,188) $ (336,461) Proceeds (Payment) Notes Payable 594.911 39.591 Net Change in Cash -570,000 -750,000 780.000 1530.000 (Purchase) Sale Treasury Stock (1,100,000) (504,000 Beginning Cash Ending Cash $ 210 000 $ 780 000 Dividends Paid (48,000 (25,000) Cash from Financing (553,089) (489,409) Net Change in Cash (570,000; (750,000 Beginning Cash 780.000 1 530,000 Ending Cash 210,000 780,000 O CorpA Balance Sheets CorpA Income Statements CorpA Statement of Cash Flows CorpA Firm ... + :1A B C D E F G H Corporation A Firm and Industry Financial Ratios 20X3/20X2 20X3 20X2 Industry Return on Equity 0.27 0.19 0.14 Dividend Payout 0.18 0. 15 0.10 Return on Assets 0.10 0.09 0.10 8 Return on Sales 0.11 0.12 0.11 9 Asset Turnover 0.92 0.77 1.02 10 Current Ratio 1.39 3.46 2.35 11 Quick Ratio 0.75 2.46 1.75 12 Debt/Assets 0.70 0.53 0.35 13 Accounts Receivable Days 26.40 27.11 19.50 14 Inventory Days 60.91 70.23 41.50 15 Accounts Payable Days 25.59 31.73 28.40 16 Summary: Cash Conversion Days 61.71 65.61 32.60 17 18 10 . . . CorpA Income Statements CorpA Statement of Cash Flows CorpA Firm & Industry Ratios Corp + ReadyAdd header Corporation A Common Stock: The rm has 400,000 shares authorized and 100,000 shares issued at yearend 20x1, 20x2, and 20x3. Treasury Stock: The rm purchased 1,000 shares of treasury stock at yearend 20x1, 12,000 at yearend 20x2, and 20,000 at yearend 20x3. Market Vatuatr'on : The market price of the stock was $31 at yearend 2006, $35 at yearel- For valuation purposes, industry experts use the dividend valuation model to value the common equity interest of industry rms. Potential investors' required rate of return for this rm is 14%; growth rate is 13% for 20x4 and 20X5, and then declines to 12% for all later years. Market Returns: The stock returns for the market as a whole were as follows: 15.7% in 20x1, 8.2% in 20x2, and 12.1% in 20x3. I: orpa Firm 3'. In d H t r_-,-' F-Latios 'age: 1 of1 A B C D E F G H J Corporation A Corporation A Comparative Balance Sheets Comparative Income Statements As of December 31 For the 12 Months Ended December 31 Assets: 20X3 20X2 20X1 Cash $ 210,000 S 780,000 S 1,530,000 20X3 20X2 20X1 Accounts Receivable 315,000 265,000 240,000 Sales Revenue $4,010,000 $3,400,000 $2,300,000 Inventory 436,000 405,000 330,000 Cost of Goods Sold Expense (2,520,000) (1,910,000) (940,000) Prepaid Insurance 15,000 18,000 21,000 Salaries and Wages Expense (660,000) (840,000) (750,000) Total Current Assets S 976,000 $ 1,468,000 S 2,121,000 Depreciation Expense-Building (115,000) (88,000) (70,000) Land 1,650,000 1,630,000 1,400,000 Insurance Expense (117,000) (102,000) (95,000) Buildings 2,300,000 1,760,000 1,400,000 Total Expenses (3,412,000) (2,940,000) (1,855,000) Less: Accumulated Depreciation 560,000) (490,000) (440,000) Net Buildings 1,740,000 1,270,000 960,000 Operating Income 598,000 460,000 445,000 Total Long-Term Assets 3,390,000 2,900,000 2,360,000 Interest Expense-Notes (76,911) (69,591) (54,749) Total Assets 4,366,000 4,368,000 4,481,000 Interest Expense-Bonds (66,734) (66,286) (65,868) Liabilities & Stockholder's Equity Gain (Loss) Sale of Buildings (2,000) 45,000 (51,000) Accounts Payable 215,000 134,000 185,000 Gain (Loss) Sale of Land (3,000) 43,000 7,000 Salaries and Wages Payable 63,000 49,000 40,000 Total Other (148,645) (47,877) (164,617) Dividends Payable 69,702 36,818 0 Net Income $449,355 $412,123 $280,383 Notes Payable-Line of Credit 356,000 205,000 98,000 Earnings per share $6.71 $4.74 $2.83 Total Current Liabilities 703,702 424,818 323,000 Notes Payable-Long-Term 1,393,722 949,811 1,017,219 Bonds Payable 1,000,000 1,000,000 1,000,000 Less: Discount on Bonds Payable (41.583) (48.317) (54.603) Net Bonds Payable 958,417 951,683 945,397 Total Long-term Liabilities 2.352,139 1,901,494 1,962,617 Total Liabilities 3,055,841 2,326,312 2,285,617 Contributed Capital 1,500,000 1,500,000 1,500,000 Retained Earnings 1,449,159 1,080,688 730,383 Treasury Stock (1.639,000) (539,000) (35,000) Total Stockholders' Equity (SE) 1,310,159 2,041,688 2,195,383 Total Liabilities & Stockholdler's Equity $4.366.000 $4.368.000 $4.481.000 CorpA Balance Sheets CorpA Income Statements CorpA Statement of Cash Flows CorpA Firm . . . + 1 destination a press ENTER or choose Paste
