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6 Bentley Corporation's most recent financial statements. Use the following ratios and other selected 7 information for the current and projected years to answer the next questions. 8 9 Income Statement for the Year Ending December 31 (Millions of Dollars) 10 2019 11 Net Sales $ 800.0 12 Costs (except depreciation) $ 576.0 13 Depreciation $ 60.0 14 Earning before int. & tax $ 164.0 15 Less interest $ 32.0 16 Earning before taxes $ 132.0 17 Taxes (25%) $ 33.0 18 Net income before pref. div. $ 99.0 19 Preferred div. $ 9.0 20 Net income avail. for com. div. $ 90.0 21 Common dividends $ 30.0 22 Addition to retained earnings $ 60.0 23 24 Number of shares (in millions) 10 25 Dividends per share $ 3.00 26 Tax rate 25% 27 28 Balance Sheets for December 31 (Millions of Dollars) 29 Assets 2019 30 Cash $ 8.0 31 Short-term investments 20.0 32 Accounts receivable 80.0 33 Inventories 160.0 34 Total current assets $ 268.0 35 Net plant and equipment 600.0 2019 16.0 40.0 40.0 96.0 Liabilities and Equity Accounts Payable $ Notes payable Accruals Total current liabilities $ Long-term bonds $ Preferred stock $ Common Stock (Par plus PIC) $ Retained earnings Common equity $ Total liabilities and equi $ 300.0 100.0 $ 868.0 36 Total Assets 37 257.0 211.0 38 468.0 868.0 39 40 40 41 Projected ratios and selected information for the current and projected years are shown below. 42 43 Inputs Actual Projected Projected Projected Projected 44 12/31/2019 12/31/20 12/31/21 12/31/22 12/31/23 45 Sales Growth Rate 46 Costs/Sales 47. Depreciation/(Net PPE) 48 Cash/Sales 49 (Acct. Rec.)/Sales 50 Inventories/Sales 51 (Net PPE)/Sales 52 (Acct. Pay.)/Sales 53 Accruals/Sales 54 Tax rate 55 Weighted average cost of capital (WACC) 56 72% 10% 1% 10% 20% 75% 2% 5% 25% 10.5% 15% 72% 10% 1% 10% 20% 75% 2% 5% 25% 10.5% 10% 72% 10% 1% 10% 20% 75% 2% 5% 25% 10.5% 6% 72% 10% 1% 10% 20% 75% 2% 5% 25% 10.5% 6% 72% 10% 1% 10% 20% 75% 2% 5% 25% 10.5% 2 Comment. 13 74 d. Calculate the current value of operations. (Hint: First calculate the horizon value at the end of the 15 forecast period, which is equal to the value of operations at the end of the forecast period. Assume 16 that the annual growth rate beyond the horizon is equal to the growth rate at the horizon.) How does 17 the current value of operations compare with the current amount of total net operating capital? 18 19 Weighted average cost of capital (WACC) 10.5% 20 121 Actual Projected Projected Projected Projected 122 12/31/2019 12/31/20 12/31/21 12/31/22 12/31/23 123 Free cash flow 124 Long-term constant growth in FCF 125 Horizon value 126 127 Present value horizon value 128 Present value of forecasted FCF 129 Value of operations (JPV of HV] + [PV of FCF]) 130 131 Total net operating capital 132 133 134 Comment. 135 136 e. Calculate the price per share of common equity as of 12/31/2019 Actual 12/31/2019 138 Millions except price per share 139 140 Value of operations 141 + Value of short-term investments 142 Total value of company 143 - Total value of all debt 144 - Value of preferred stock 146 Value of common equity 146 Divided by number of shares 147 Price per share 14