Individual Case Daktronics

$1.$ Evaluate Daktronics$$ past financial performance using financial ratios,

common size financial statements and equity cash flows. How does the

company compare to industry average? Is your analysis consistent with

the stock price performance in fig$\mathrm{.}1$ of the case?

$2.$ Using your historical financial ratio analysis and analysts$$ reports estimate a

percentage of sales model for Daktronics$$ pro$-$forma income statements

and balance sheets for the next four years. Make and exhibit of your

planning assumptions and justify your choices.

$3.$ Based on your percent of sales model, compare and contrast the

financial ratios from the historical period with the planning period.

$4.$ Construct equity free cash flows for the next four years and estimate how

much Daktronics can afford to pay as dividends, assuming that a cash

balance of $$20$ million is required each year. Thus cash balances in

excess of $$20$ million are $$excess$$ cash flows which can be paid out.

$5.$ Evaluate the company$$s current dividend policy? Should dividends be

increased? What are the advantages and disadvantages of increasing

dividends? If dividends are increased, what form should the distribution

take? How much should the firm payout? Discuss how different

shareholder groups might respond to increased dividends.

$6.$ What are the capital structure and unused debt capacity of increasing

dividends? Use FRICTO analysis. F $($Flexibility of future financing choices$),$ R

$($Risk of increasing dividends$),$ I $($Impact of increased dividends on

income$),$ C $($Impact of dividends on control of the company$),$ T $($Tax

effects of increased dividends$)$ and O $($Other issues raised by increased

dividends$)$ to frame your analysis.

$7.$ Construct a free cash flow to equity valuation model for the next four

years and estimate a share price today. Assume the required cash

balances equal $$20$ million annually. Estimate the terminal value using

both a constant growth model and a multiple of EBITDA of $9.$ How does

your estimated price compare with the price given in the case?

$8.$ Evaluate the company$$s current capital structure. Discuss the implications

of the various theories of capital structure for Daktronics$$ use of debt.

Discuss the advantages and disadvantages of increasing the amount of

debt used by Daktronics.