help me please!
Casey Hyunh is trying to value the stock of Resources Limited. To casily see how a change in one or more of her assumptions alfects the ertimated yalue of the stock, she is using a spreadsheet model (Download and use the spreadsheet provided in Canvas). The model has projections for the next four years based on the following assumptions - Sales will be $300 million in Year 1. - Sales will grow at 15 percent in Years 2 and 3 and 10 percent in Year 4. - Operating profits (EBIT) will be 17 percent of sales in each year. - Interest expense will be $10 million per year. - Income tax rate is 30 percent. - Earnings retention ratio would stay at 0.60. - The per-share dividend growth rate will be constant from Year 4 forward and this final growth rate will be 200 basis points less than the growth rate from Year 3 to Year 4. The company has 10 million shares outstanding. Hyunh has estimated the required return on Resources' stock to be 13 percent. A. Based on the above assumptions, the spreadsheet shows the value of the stock at the end of Year 4 is estimuted to be (Enter your answer as a number with two decimal ploces and no currency symbol, For example, if your dinswer is 599.1234, enter 899.12] B. Based on the above assumptions, the spreadsheet shows the current value of the stock is estimated to be (Enter your answer as a number with two decimal places and no currency symbol. For exomple. if your answer is 589.1234, enter. B9.12i) C. Hyunh is wondering how a change in the projected sales growth rate would affare tha octimated value. if the sales growth rate in Year 3 is 10 percent instead of 15 percent the spreadsheet shows the current value of the stock would be estimated to be doliars. (Enter your answer as a number with two decimal places and no currency symbol. For ewample, if your answer is $89.1234, sniter 89.12 ) Kawo Uto is analyzing the stock of Brother Industries, Ltd, a diversitied Japanese company that produces a wide variety of products, Brother distributes its products under its own name and under original-equipment manufacturer agreements with other companies, Uto has concluded that a multistage DDM is aporopriate to value the stock of Brother Industries and the company will reach a mature stage in four years. The ROE of the company has declined from 16.7 percent in the frscal year ending in 2004 to 12.7 percent in the fiscal year ending in 2008 . The dividend payout ratio has increased from 11.5 percent in 2004 to 22.3 percent in 2000 . Uto has estimated that in the mature phase Brother's ROE will be 11 percent, which is approximately equal to estimated required return on equity. He has also estimated that the payout ratio in the mature phase will be 40 percent. which is significantly greater than its payout ratio in 2004 but less than the average payout of about 50 percent for Japanese companies. With reference to the formula for the sustainable growth rate, colleagoe of Uto asserts that the greater the earnings retention ratio, the greater the sustainable growth rate because gi is a positive function of b. The colleague argues that Brother should decrease payout ratio. Eyplain the flaw in that arsument. (Select ail answers which are correct) If the return accruing to additional investments is lower than expected, overall ROE will be lower than expected. Uto should correctly compute the sustainable growth rate in the mature phase to be 6.6N Uto should correctly compute the sustainable growt rate in the mature phase to be 4.4% Based on the formula for sustainable growth rate, as the retention ratio increases, growth rate increases, holding all else constant. If the payout ratio decreases, the retention ratio increases. Decline in ROE may lead to a lower growth rate even if the retention ratio increases
