Question
Note the following: ROE = NI / Total equity Payout ratio = total cash dividends / NI There are 10million shares outstanding. T-bill rate is
Note the following:
ROE = NI / Total equity
Payout ratio = total cash dividends / NI
There are 10million shares outstanding.
T-bill rate is 3.0%, S&P500 mkt return was 10.00%, and beta of this company is 1.5.
equity beta of this company is 1.5.
FCF (Free cash flow) = EBIT * (1-tax rate) + Depreciation NCS change in NWC
assume that the market value of debt is equal to the book value of debt.
Balance sheet (in millions) of 2021 and 2022 | ||||||||
2021 | 2022 | 2021 | 2022 | |||||
Current Assets | 380 | 450 | Current liabilities | 150 | 200 | |||
Fixed Asset | 600 | 500 | Fixed Debt | 380 | 250 | |||
Total equity | 450 | 500 | ||||||
Total Asset | 980 | 950 | Total liabilities+equity | 980 | 950 |
Income Statement (in millions) of 2022 | |
Revenue | 500 |
all expenses | -200 |
EBIT | 300 |
Interest expense | -100 |
EBT | 200 |
Tax | -90 |
NI = | 110 |
Assume this company does not pay any dividend. And further assume that the Free cash flow and the earnings will grow at the constant rate of 4.5%.
Question #1. With this assumption, What should be the stock value per share using the Free Cash Flow (FCF) model?
----------------------------------------------------------------------------------
For the following questions, find the expected stock price using the table below per price ratio analyses:
QUESTION #2. Find the expected stock price for year 2017 using the p/e ratio
QUESTION #3. Find the expected stock price for year 2017 using the p/cf ratio
QUESTION #4. Find the expected stock price for year 2017 using the p/s ratio
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started