Please fill in missing values

Apply the Residual Earnings Model (Ch-5) to the data below to estimate the Stock Value. Discount rate is >> 12.75% 1) 12Pts Assume Residual Earnings for Year t=4 and later remains constant $ amount at the t=3 level you calculated ( 'g'=0 ). 2) 6pts What's new Stock $ estimate if now starting at Yr t=4, Resid. Earns remains at repeat constant annual > $ 2.75 3) 6pts What's new Stock $ estimate if now starting at Yr t=4, Resid. Earns grows from t =3 $ level at constant 4.00% Current Forecast Forecast Forecast Forecast Exam-2 due Oct-31 Actual t=1 t=2 t = 3 EARINGS PER SHR $ 6.00 $ 6.75 $ 7.65 $ 8.75 DIVIDEND $ 2.00 $ 2.10 $ 2.20 $ 2.35 BOOK VALUE $ 48.00 $ 52.65 $ 58.10 $ 64.50 Calculate % RET ON EQUITY ? ? ? 0.1275 $ Answ #2 Part 3 Annual growth after t=3 => 4.00% Stk Value incl growing CV > $ Answ #3 24 pts FREE CASH FLOW VALUATION Exm-2 2 NAME > Oct31 Use the forecast below to find this stock's value. Expected constant growth 'yfor Free Cash Flow is DEBT--> S 5,000 WACC) Assumes tax rate is 0.2.35 3.20% 7.80% 13 C D $ Millisin EBIT ERIT (I-TXR) Depreciation E Change in Work Capital F Capital Spending H Free Cash Flow > Firm Exam-2 Part 2 Due Oct 31 NAME SOLUTION | Page 3 #3.1 Calculate the missing values, enter the answer in answer boxes. 12 pts Current Forecast Forecast Forecast Exam2 At-Home OCT-31 t=0 t=1 t=2 t = 3 EARINGS PER SHR $ 3.25 $ 4.50 $ 5.50 $ 6.75 DIVIDEND per share $ 1.25 $ 1.30 $ 1.40S 1.60 BOOK VALUE P/S ??? >$ 42.00? ? ? % RET ON EQUITY ??? > ? ? ? Ate1 answ At=2 answA At=3 answA Pres. Value FCF Firm FORECAST YEAR Pres. Value Factors 1 1 $200 $688.5 $75 S40 $225 2 $970 $742.1 $85 S50 $2401 3 3 Assume # of shares issued is unchanged and Other counprehensive income' = $0 SI,OSO $100 S60 $250 S803.3 S860.6 4 SI 125 $110 $70 $265 IS A Answ #11 TERMINAL VALUE PROJECTION 5 Assume all future Froe Cash Flow to Firm grow al contant'g- 0.032 Terminal value at START of Year 5 - FCF END Yr 4 / (WACC - '&') where 'g' is projected constant future growth rate of FCF, assumed in this probat> 0.032 PVF Terminal Pres. Value IS ^ Answ #2 SUM OF PVs OF PROJECTED FCF TO TcstCo = millions S 5,000 S 5,000.00 Assume this firm's debt is now s millions SUBTRACT DEBT PAY-OFF SOLUTION OF VALUE OF TestCo's EQUITY = based on residual CF to shareholders millions 55 > 12.75% 1) 12Pts Assume Residual Earnings for Year t=4 and later remains constant $ amount at the t=3 level you calculated ( 'g'=0 ). 2) 6pts What's new Stock $ estimate if now starting at Yr t=4, Resid. Earns remains at repeat constant annual > $ 2.75 3) 6pts What's new Stock $ estimate if now starting at Yr t=4, Resid. Earns grows from t =3 $ level at constant 4.00% Current Forecast Forecast Forecast Forecast Exam-2 due Oct-31 Actual t=1 t=2 t = 3 EARINGS PER SHR $ 6.00 $ 6.75 $ 7.65 $ 8.75 DIVIDEND $ 2.00 $ 2.10 $ 2.20 $ 2.35 BOOK VALUE $ 48.00 $ 52.65 $ 58.10 $ 64.50 Calculate % RET ON EQUITY ? ? ? 0.1275 $ Answ #2 Part 3 Annual growth after t=3 => 4.00% Stk Value incl growing CV > $ Answ #3 24 pts FREE CASH FLOW VALUATION Exm-2 2 NAME > Oct31 Use the forecast below to find this stock's value. Expected constant growth 'yfor Free Cash Flow is DEBT--> S 5,000 WACC) Assumes tax rate is 0.2.35 3.20% 7.80% 13 C D $ Millisin EBIT ERIT (I-TXR) Depreciation E Change in Work Capital F Capital Spending H Free Cash Flow > Firm Exam-2 Part 2 Due Oct 31 NAME SOLUTION | Page 3 #3.1 Calculate the missing values, enter the answer in answer boxes. 12 pts Current Forecast Forecast Forecast Exam2 At-Home OCT-31 t=0 t=1 t=2 t = 3 EARINGS PER SHR $ 3.25 $ 4.50 $ 5.50 $ 6.75 DIVIDEND per share $ 1.25 $ 1.30 $ 1.40S 1.60 BOOK VALUE P/S ??? >$ 42.00? ? ? % RET ON EQUITY ??? > ? ? ? Ate1 answ At=2 answA At=3 answA Pres. Value FCF Firm FORECAST YEAR Pres. Value Factors 1 1 $200 $688.5 $75 S40 $225 2 $970 $742.1 $85 S50 $2401 3 3 Assume # of shares issued is unchanged and Other counprehensive income' = $0 SI,OSO $100 S60 $250 S803.3 S860.6 4 SI 125 $110 $70 $265 IS A Answ #11 TERMINAL VALUE PROJECTION 5 Assume all future Froe Cash Flow to Firm grow al contant'g- 0.032 Terminal value at START of Year 5 - FCF END Yr 4 / (WACC - '&') where 'g' is projected constant future growth rate of FCF, assumed in this probat> 0.032 PVF Terminal Pres. Value IS ^ Answ #2 SUM OF PVs OF PROJECTED FCF TO TcstCo = millions S 5,000 S 5,000.00 Assume this firm's debt is now s millions SUBTRACT DEBT PAY-OFF SOLUTION OF VALUE OF TestCo's EQUITY = based on residual CF to shareholders millions 55