Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

hi can you please help You have the following data and information on PROGRP, a company producing computer systems for use in corporate treasuries, Forecast

hi can you please help
image text in transcribed
You have the following data and information on PROGRP, a company producing computer systems for use in corporate treasuries, Forecast 2022 2023 2024 2025 2026 EBIT (5m) 3450 3709 3987 4286 4607 Interest Expenses (sm) -13 -14 -15 -16 -17 Earning Before Tax (sm) 3437 3695 3972 4270 4590 Taxes (sm) -1031 -1109 - 1192 -1281 -1377 Depreciation Expenses (sm) -1084 - 1350 -1556 -1762 -1894 Net CAPEX (SM) -1980 -3590 -8860 -2710 -1960 Net Changes in NWC (SM) 1160 1644 -1450 932 1002 Cash flow assumptions and other information: Beyond 2026, competition will have eroded margins and the industry sector will be entering the maturity phase of the industry life cycle Growth in free cash flow is expected to continue, perpetually, at the expected average rate of growth for the economy of four per cent per annum, PROGRP's sales for 2021 were $8,990 million. For 2022, sales of $10,310 million are forecasted. Earnings for 2021 were 52,404 million, with earnings of $2,530 expected for PROGRP in 2022. The book value of equity was $5,048 million as of the end of 2021, with $670 million PROGRP shares outstanding, PROGRP's interest-bearing debt stood at $425 million at the end of 2021. Corporate taxes are applied at a rate of 30 percent. Currently, the market price per share is $36.1. The after-tax cost of capital (WACC) for PROGRP IS 8.65 percent. Comparative industry average pricing ratios are P/S of 2.6, P/E of 12.2 and P/BV of 45. a. Develop three market-based relative valuations of the per share value of PROGRP. (6 marks) b. Estimate the Free Cash Flow to the Firm for PROGRP and develop an estimate of the per share value of PROGRP based on free cash flow. (16 marks) c. Based on your valuations in a, and b. do you believe PROGRP to currently be fairly valued on a per share basis? Briefly justify your decision. (3 marks) You have the following data and information on PROGRP, a company producing computer systems for use in corporate treasuries, Forecast 2022 2023 2024 2025 2026 EBIT (5m) 3450 3709 3987 4286 4607 Interest Expenses (sm) -13 -14 -15 -16 -17 Earning Before Tax (sm) 3437 3695 3972 4270 4590 Taxes (sm) -1031 -1109 - 1192 -1281 -1377 Depreciation Expenses (sm) -1084 - 1350 -1556 -1762 -1894 Net CAPEX (SM) -1980 -3590 -8860 -2710 -1960 Net Changes in NWC (SM) 1160 1644 -1450 932 1002 Cash flow assumptions and other information: Beyond 2026, competition will have eroded margins and the industry sector will be entering the maturity phase of the industry life cycle Growth in free cash flow is expected to continue, perpetually, at the expected average rate of growth for the economy of four per cent per annum, PROGRP's sales for 2021 were $8,990 million. For 2022, sales of $10,310 million are forecasted. Earnings for 2021 were 52,404 million, with earnings of $2,530 expected for PROGRP in 2022. The book value of equity was $5,048 million as of the end of 2021, with $670 million PROGRP shares outstanding, PROGRP's interest-bearing debt stood at $425 million at the end of 2021. Corporate taxes are applied at a rate of 30 percent. Currently, the market price per share is $36.1. The after-tax cost of capital (WACC) for PROGRP IS 8.65 percent. Comparative industry average pricing ratios are P/S of 2.6, P/E of 12.2 and P/BV of 45. a. Develop three market-based relative valuations of the per share value of PROGRP. (6 marks) b. Estimate the Free Cash Flow to the Firm for PROGRP and develop an estimate of the per share value of PROGRP based on free cash flow. (16 marks) c. Based on your valuations in a, and b. do you believe PROGRP to currently be fairly valued on a per share basis? Briefly justify your decision

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Options Futures And Other Derivatives

Authors: John C. Hull

4th Edition

0130224448, 9780130224446

More Books

Students also viewed these Finance questions

Question

2 What are the key barriers to implementing HRM?

Answered: 1 week ago

Question

1 What are three of the formative traditions in HRM?

Answered: 1 week ago