Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help me to answer the question 6 and 7 as follow (attach files). Question 6 Use the following information concerning Johnson Machine Tools Ltd
Please help me to answer the question 6 and 7 as follow (attach files).
Question 6 Use the following information concerning Johnson Machine Tools Ltd in Part a & b. Johnson's income statement from the fiscal year that ended this past Revenue Cost of sales Gross profit Selling, general, & administrative expenses Operating profit (EBIT) Interest expense Earnings before tax Tax Profit December is: $995 652 $343 135 $208 48 $160 _64 $ 96 All dollar values are in millions. Depreciation and amortisation expenses last year were $42 million, and the company has $533 million of debt outstanding. You are an analyst at a company that buys private companies, improves their operating performance, and sells them for a profit. Your boss has asked you to estimate the fair market value of the Johnson Machine Tools Ltd. Billy's Tools is a public company with business operations that are virtually identical to those at Johnson. The most recent income statement for Billy's Tools is as follows: 5 Revenue Cost of sales Gross profit Selling, general, & administrative expenses Operating profit (EBIT) Interest expense Earnings before tax Tax Profit $1,764 1,168 $ 596 211 $ 385 12 $ 373 147 $ 226 All dollar values are in millions. Billy's had depreciation and amortisation expenses of $71 miUion last year and 200 million shares and $600 million of debt outstanding as of the end of the year. Its share is currently trading at $12.25 per share. Required Part (a) Using the P/E multiple, what is the value of Johnson's shares? What is the total value of Johnson Machine Tools Ltd? Part(b) Using the enterprise (company) value/EBITDA multiple, what is the total value of Johnson Machine Tools Ltd? What is the value of Johnson's shares? Question 7 Victoria Home Brew forecasts that if it sells each bottle of HBrew for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Victoria's variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortisation charges are $20,000, and the company is in the 30 percent tax rate. The company anticipates an increased working capital need of $3,000 for the year. Required Part (a) What will be the effect of a price increase on the company's FCF for the year? Present your solution in statement format. Part (b) Sensitivity analysis and scenario analysis are similar. Describe which is a more realistic method of analysing different scenario impacts on a project ; continuedStep 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