Question
Doc Tom is preparing a presentation that analyzes the valuation of the common stock of Dante Corporation. Tom has prepared preliminary valuations of Dante using
Doc Tom is preparing a presentation that analyzes the valuation of the common stock of Dante Corporation. Tom has prepared preliminary valuations of Dante using a FCFF model. Dantes 2018 and 2019 financial statements, contained in Exhibits 1 and 2, are prepared in accordance with US GAAP (in millions).
Exhibit 1. Dante Corporate Partial Consolidated Balance Sheet (As of December 31)
2019 | 2018 | |
Assets | ||
Current assets | ||
Cash and cash equivalents | 472 | 352 |
Accounts receivable | 732 | 766 |
Inventories | 715 | 735 |
Total current assets | _____ | _____ |
Gross fixed assets | 3,157 | 3,108 |
Total assets | _____ | _____ |
Liabilities and shareholders equity | ||
Current liabilities | ||
Accounts payable | 421 | 457 |
Accrued taxes and expenses | 193 | 138 |
Notes payable | 480 | 416 |
Total current liabilities | _____ | _____ |
Long-term debt | 1,667 | 1,575 |
Common stock | 580 | 503 |
Retained earnings | _____ | _____ |
Total liabilities and shareholders equity | _____ | _____ |
Exhibit 2. Dante Corporation Consolidated Income Statement for the Year Ended 31 December 2019 (US$ Millions)
Total revenues | 3,020 |
Cost of goods sold | 1,079 |
Selling, general, and administrative expenses | 748 |
Earnings before interest, taxes, depreciation, and amortization (EBITDA) | ____ |
Depreciation expense | 257 |
Operating income | ____ |
Interest expense | 102 |
Pretax income | ____ |
Income tax (at 28 percent) | ____ |
Net income | ____ |
Your task is to calculate the FCFF.
Write your answer in decimal form and round it to two decimal places. Your answer will be in millions, for example - if you get 234.24, you can write 234.24 - but in fact, it is 234.24 "millions".
Hint: To get the balance sheet data, remember that assets are equal to liabilities plus shareholders' equity.
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