Laiho Industries December 31 Balance Sheet
Assets	2018	2017
Cash and Cash Equivalents	$37.66	$10.00
Accounts Receivable	$180.00	$150.00
Inventories	$180.00	$200.00
Total current assets	$397.00	$360.00
Gross fixed assets	$650.00	$570.00
Less acumulated depreciation	$150.00	$120.00
Net fixed assets	$500.00	$450.00
Total assets	$897.00	$810.00
Liabilities and equity
Accounts Payable	$108.00	$90.00
Accruals	$67.00	$51.50
Notes payable	$72.00	$60.00
Total current Liabilities	$247.00	$201.50
Long-Term Debt	$350.00	$350.00
Total Liabilities	$597.00	$551.50
Common Stock (50 million shares)	$50.00	$50.00
Retained Earnings	$250.66	$208.50
Total common equity	$300.66	$258.50
Total liabilities and quiety	$897.55	$810.00
Laiho Industries Income Statement (in millions)
Sales	$1,200.00	$1,000.00
Expenses excluding depreciation and amoortization	$1,020.00	$850.00
EBITDA	$180.00	$150.00
Depreciation and amortization	$30.00	$25.00
EBIT	$150.00	$125.00
Interest expense	$21.70	$20.20
EBT	$128.30	$104.80
Taxes (26%)	$25.66	$20.96
Net Income	$102.64	$83.84
Common Dividends	$60.48	$46.38
Addition to retained earnings	$42.16	$37.46
Statement of Stockholder's Equity (In millions)
Balance of Retained Earnings, December 31, 2017	$208.50
Add: Net income	$102.64
Less: Common dividends paid	-$60.48
Balance of retained Earnings, December 31, 2018	$250.66
Statement of Cash Flows (in millions)
Operating Activities
Net Income	$102.60
Depreciation and amortization	$30.00
increase in accounts payabale	$18.00
increase in accruals	$15.50
increase in accounts receivable	-$30.00
increase in inventories	$20.00
Net cash provided by operating activities	$156.10
Investing Activities
Additions to property, plant, and equipment	-$80.00
Net cash used in investing	-$80.00
Financing Activities
Increase in notes payable	$12.00
Increase in long-term debt	$0.00
Increase in common stock	$0.00
Payment of common dividends	-$60.50
Net cash provided by financing activities	-$48.50
Summary
Net increase/decrease in cash	$27.70
Cash Balance at the beginning of the year	$10.00
Cash balance at the end of the year	$37.70

Suppose we want to value Laiho Industries. The statements are available in the Appendix. The current market price is $22 per share, the beta of the company is 1.2. The market risk premium is 5 percent, the risk-free rate is 3 percent, and the company's long-term debt cost is 6.20%. Marginal tax rate is 40% 1. Calculate the dividend per share 2. Calculate free cash flow to equity. 3. Calculate the free cash flow to firm. 4. Calculate the equity reinvestment rate. 5. Calculate the reinvestment rate. 6. Calculate cost of equity and cost of capital to be used in both the first stage and the second stage. 7. Calculate sustainable growth rate in earnings using retention ratio and equity reinvestment rate. 8. Calculate the growth rate of operating income using the reinvestment rate (note: you will have to use in the exam not only this approach but also the other approaches you learned in class). Most analysts believe that the company will grow for the next 5 years at the rate of 15%; then, it will grow at the long-run growth rate of the economy. Also, assume that the risk-free rate and market risk premium remain at their current level in the second stage. 9. Calculate value of equity per share (price) using the free-cash flow to firm approach 10. Calculate value of equity per share (price) using the free-cash flow to equity approach 11. What can you tell about this company? Is it undervalued, overvalued or fairly valued? Explain Suppose we want to value Laiho Industries. The statements are available in the Appendix. The current market price is $22 per share, the beta of the company is 1.2. The market risk premium is 5 percent, the risk-free rate is 3 percent, and the company's long-term debt cost is 6.20%. Marginal tax rate is 40% 1. Calculate the dividend per share 2. Calculate free cash flow to equity. 3. Calculate the free cash flow to firm. 4. Calculate the equity reinvestment rate. 5. Calculate the reinvestment rate. 6. Calculate cost of equity and cost of capital to be used in both the first stage and the second stage. 7. Calculate sustainable growth rate in earnings using retention ratio and equity reinvestment rate. 8. Calculate the growth rate of operating income using the reinvestment rate (note: you will have to use in the exam not only this approach but also the other approaches you learned in class). Most analysts believe that the company will grow for the next 5 years at the rate of 15%; then, it will grow at the long-run growth rate of the economy. Also, assume that the risk-free rate and market risk premium remain at their current level in the second stage. 9. Calculate value of equity per share (price) using the free-cash flow to firm approach 10. Calculate value of equity per share (price) using the free-cash flow to equity approach 11. What can you tell about this company? Is it undervalued, overvalued or fairly valued? Explain