*Please answer on Excel with formulas
Chapter 14 BAM J. Clark Inc. (JCI), a manufacturer and distributer of sports equipment, has grown until it has become a stable, mature company Now JCI is planning its first distribution to shareholders. Shown below are the most recent year's financial statements and projections for the next year, 2017 (Jcl has a fiscal year ending on June 30). JCI plans to liquidate $500 million of its short-term securities and distribute them on July 1, 2017, the first day of the next fiscal year, but has not yet decided whether to distribute with dividends or with stock repurchases. Inputs Amount of distribution Tax rate WACC Number of shares FCF constant growth rate $500 AN% 11.0% 1,000 6.0% Actual Projected 6/30/17 21,200.00 $16,000.00 $16,960.00 $1,378.00 $2,862.00 $152.82 09.18 1,083.67 $1,625.51 Income Statement (Millions of Dollars) Net Sales Costs (except depreciation) Depreciation Earning before int. & tax Interest expense Earnings before taxes Taxes 6/30/16 $20,000.00 $1,300.00 $2,700.00 $150.00 $2,550.00$2,7 1,020 $1,530.00 Net income a. Assume first that JCI distributes the $500 million as dividends. Fill in the missing values in the balance sheet column for July 1, 2017, that is labeled "Distribute as Dividends." (Hint: Be sure that the balance sheets balance after you fill in the missing items. Also, assume JCI did not have to establish an account for dividends payable prior to the distribution.) b. Now assume that JCl distributes the $500 million through stock repurchases. FIll in the missing values in the balance sheet column for July 1, 2017, that is labeled "Distribute as Repurchase." (Hint: Be sure that the balance sheets balance after you fill in the missing items.) Hints: these 2 scenarios bulld from the 6/30V17 numbers to the left Projected: Prior to Distribute as Dividend Distribute as Balance Sheets (Millions of Dollars Actual Distribution $169.60 $640.00 $2,120.00 $169.60 $2,120.00 $5,469.60 $19,249.60 $1,060.00 $169.60 $2,120.00 $5,469.60 $19,249.60 $1,060.00 $160.00 $200.00 $2,000.00 Accounts receivable Inventories Total current assets $5,360.00 $6,109.60 Net plant and equipment Liabilities&Equity Accruals $18,360.00 $19,889.60 Total assets $1,000.00 $2,000.00 $1,060.00 $2,120.00 $2,120.00 $3,180.00 $5,372.27 $2,120.00 $3,180.00 $5,372.27 Short-term debt Total current liabilitles $3,400.00 $3,180.00 Long-term debt Total liabilities $5,468.18 $5,851.82 ($400.00) $5,372.27 $5,851.82 ($400.00) Common stock Treasury stock Retained earnings $5,851.82 $5,851.82 Total common equity 12.891 82 $14517 33 Total liabilities & equty $1000$19,889.60 $11,224.09 $11,224.09 NOT BALANCED Check for balance: BALANCED Caculate Ja's projected free cash flow; the tax rate is 40%. c. Projected Calcufation of Free Cash Flow Operating current assets Operating current liabilitles Net operating working capital Net plant & equipment Total net operating capital Net operating profit after taxes Imv. in operating capital Free cash flow (FCF) 6/30V2016 630V2017 $5,160.00 3,000.00 $2,160.00 13,000.00 $15,160.00 $1,620.00 c. Caculate Ja's horizon value for 6/30/2017. FCF is expected to grow at a constant rate of 6% and Ja's WACC is 11%. Calculate Ja's value of operations for 6/30/2016 and 6/30/2017(Hint: Ja's value of operations on 6/30/2017 is equal to the horlzon value. Valuation Horizon value Value of operations 6/30V2016 630V2017 Hint: 6/30/17 Vop is between$17,120 and $17,125 Hint: 6/30/16 Vop is between $16,150 and $16,155 d WIat ls Ja's current intrinsic stock price (the price on 6/30/2016)? what is the projected intrinsic stock price for 6/30V2017? See below for calculations. e. What is the projected intrinsic stock price on 7/1/2017 If JCl distributes the cash as dividends? See below for calculations. f. What is the projected Intrinsic stock price on 7/1/2017 If JCI distributes the cash athrough stock repurchases? How many shares will remain outstanding after the repurchase? See below for calculations. Distribute as Dividend 7/1/2017 Distribute as 6/30V2016 630V2017 7/1/2017 Value of operations Hint: this changes for dividends (to $140) Total intrinsic value of firm Debt Intrinsic value of equity Hint: this changes for repurchases (to $967.88 shares 1000 shares-$500/15 Hint:keep in mind what the lesson slides tell us about dividends and repurchases that is, paying a dividend decreases the price per share by the amount of the dividend per and repurchasing shares does not change the price per share Intrinsic price per share Hint: 6/3016 price Is between $13.85 and $13.90 per share Chapter 14 BAM J. Clark Inc. (JCI), a manufacturer and distributer of sports equipment, has grown until it has become a stable, mature company Now JCI is planning its first distribution to shareholders. Shown below are the most recent year's financial statements and projections for the next year, 2017 (Jcl has a fiscal year ending on June 30). JCI plans to liquidate $500 million of its short-term securities and distribute them on July 1, 2017, the first day of the next fiscal year, but has not yet decided whether to distribute with dividends or with stock repurchases. Inputs Amount of distribution Tax rate WACC Number of shares FCF constant growth rate $500 AN% 11.0% 1,000 6.0% Actual Projected 6/30/17 21,200.00 $16,000.00 $16,960.00 $1,378.00 $2,862.00 $152.82 09.18 1,083.67 $1,625.51 Income Statement (Millions of Dollars) Net Sales Costs (except depreciation) Depreciation Earning before int. & tax Interest expense Earnings before taxes Taxes 6/30/16 $20,000.00 $1,300.00 $2,700.00 $150.00 $2,550.00$2,7 1,020 $1,530.00 Net income a. Assume first that JCI distributes the $500 million as dividends. Fill in the missing values in the balance sheet column for July 1, 2017, that is labeled "Distribute as Dividends." (Hint: Be sure that the balance sheets balance after you fill in the missing items. Also, assume JCI did not have to establish an account for dividends payable prior to the distribution.) b. Now assume that JCl distributes the $500 million through stock repurchases. FIll in the missing values in the balance sheet column for July 1, 2017, that is labeled "Distribute as Repurchase." (Hint: Be sure that the balance sheets balance after you fill in the missing items.) Hints: these 2 scenarios bulld from the 6/30V17 numbers to the left Projected: Prior to Distribute as Dividend Distribute as Balance Sheets (Millions of Dollars Actual Distribution $169.60 $640.00 $2,120.00 $169.60 $2,120.00 $5,469.60 $19,249.60 $1,060.00 $169.60 $2,120.00 $5,469.60 $19,249.60 $1,060.00 $160.00 $200.00 $2,000.00 Accounts receivable Inventories Total current assets $5,360.00 $6,109.60 Net plant and equipment Liabilities&Equity Accruals $18,360.00 $19,889.60 Total assets $1,000.00 $2,000.00 $1,060.00 $2,120.00 $2,120.00 $3,180.00 $5,372.27 $2,120.00 $3,180.00 $5,372.27 Short-term debt Total current liabilitles $3,400.00 $3,180.00 Long-term debt Total liabilities $5,468.18 $5,851.82 ($400.00) $5,372.27 $5,851.82 ($400.00) Common stock Treasury stock Retained earnings $5,851.82 $5,851.82 Total common equity 12.891 82 $14517 33 Total liabilities & equty $1000$19,889.60 $11,224.09 $11,224.09 NOT BALANCED Check for balance: BALANCED Caculate Ja's projected free cash flow; the tax rate is 40%. c. Projected Calcufation of Free Cash Flow Operating current assets Operating current liabilitles Net operating working capital Net plant & equipment Total net operating capital Net operating profit after taxes Imv. in operating capital Free cash flow (FCF) 6/30V2016 630V2017 $5,160.00 3,000.00 $2,160.00 13,000.00 $15,160.00 $1,620.00 c. Caculate Ja's horizon value for 6/30/2017. FCF is expected to grow at a constant rate of 6% and Ja's WACC is 11%. Calculate Ja's value of operations for 6/30/2016 and 6/30/2017(Hint: Ja's value of operations on 6/30/2017 is equal to the horlzon value. Valuation Horizon value Value of operations 6/30V2016 630V2017 Hint: 6/30/17 Vop is between$17,120 and $17,125 Hint: 6/30/16 Vop is between $16,150 and $16,155 d WIat ls Ja's current intrinsic stock price (the price on 6/30/2016)? what is the projected intrinsic stock price for 6/30V2017? See below for calculations. e. What is the projected intrinsic stock price on 7/1/2017 If JCl distributes the cash as dividends? See below for calculations. f. What is the projected Intrinsic stock price on 7/1/2017 If JCI distributes the cash athrough stock repurchases? How many shares will remain outstanding after the repurchase? See below for calculations. Distribute as Dividend 7/1/2017 Distribute as 6/30V2016 630V2017 7/1/2017 Value of operations Hint: this changes for dividends (to $140) Total intrinsic value of firm Debt Intrinsic value of equity Hint: this changes for repurchases (to $967.88 shares 1000 shares-$500/15 Hint:keep in mind what the lesson slides tell us about dividends and repurchases that is, paying a dividend decreases the price per share by the amount of the dividend per and repurchasing shares does not change the price per share Intrinsic price per share Hint: 6/3016 price Is between $13.85 and $13.90 per share
