Please review the attached Case Assignment and help!

Case 3 (FPL Group Inc. Dividend Policy Case Assignment This is a team work. If Team 1 completes Case 3 analysis, they should name their work as Case3Team1, save and submit it as a word document. Suppose John Smith is taking this course, and he hasn't joined in any team, then he has to finish this individually, and name his work as Case3SmithJ. After completing this assignment, each team just lets one of its members submit this assignment by clicking the link named \"Case 3 Submission\" in Module 10 on our course website. Late submission will not be accepted. Reading: Read Case 3. This case illustrates what security analysts do and the role of public information in determining stock prices. By doing the case, students should learn: What factors firms consider when establishing a dividend policy; What factors make dividend policy \"relevant\" (i.e., signaling, taxes, transaction costs, and agency conflicts); What factors lead firms to change dividend policy; How a firm's competitive and financial strategies are related. Instructions: After you reading the case, connect with your teammates and decide on how best to develop your answers to the questions below. Your answer should be clear and be easy for reader to understand how you find out the answer and why. The teams should map out critical path and ratably distribute work amongst the members. Please adhere to the prescribe format, MS Word, double spaced, Times Roman, or other true-type-font. Please put the team's name on the write-up (such as Team #), as well as each team member's name on your final submission (not in the file name, but on the coverage page or head/foot note of the document). 10% of a submission's points will be deducted it it's not formatted as required. The grading will be based on: Quality of analysis: Have you analyzed all the pertinent issues correctly and avoided obvious repetition of facts in the case? Quality of recommendations: Have you offered specific plans of action and backed these up with strong arguments? Writing: Do you present the material in a logical, clear way with no grammar/spelling errors? Your write-up should begin with an opening paragraph that synopsizes the case (1 point), and answer all the following questions: 1. Why do firms pay dividends? What, in general, are the advantages and disadvantages of paying cash dividends (1 point)? 2. Suppose FPL will pay an annual dividend of $2.48 in 1994, and assume the market risk premium (RM - Rf) is 7.5% and the risk free interest rate is 7.3% (the current yield on 30year T-bonds from Exhibit 8), and FPL Group Inc. stock is selling at $34 per share, what is the expected capital gains yield of FPL stock (2 points)? Hint: Recall in chapter 7 you've learned that the total return (the expected rate of return) is equal to dividend yield plus capital gains (loss) yield. You may apply CAPM to find the expected return on FPL stock. 3. From FPL's perspective, is the current payout ratio appropriate? Would a higher or lower payout ratio more appropriate (2 points)? Explain and justify your answer based on information in the case. 4. From an investor's perspective, is the FPL's payout ratio appropriate (2 points)? Explain and justify your answer based on information in the case. 5. As Kate Stark, what would you recommend regarding investment in FPL's stock - buy, sell, or hold (2 points)? Case 2 (Kohler Co. case) assignment Reading: Read the Kohler Co. case. This case provides a rich setting in which to learn about the valuation of privately held firms from the perspective of both the controlling shareholder(s) and minority shareholders. Instructions: After you reading the case, connect with your teammates and decide on how best to develop your answers to the questions below. Your answer should be clear and be easy for reader to understand how you find out the answer and why. Just provide a number without explanation will not earn you any point. The teams should map out critical path and ratably distribute work amongst the members. Please adhere to the prescribed format, MS Word, double spaced, Times Roman, or other true-type-font, and include the names of each team member on your final submission. Each team should only submit one document. If you use excel to do the analysis, you may include your excel spreadsheet in the word document. Each team just let one member submit the assignment by submitting it via the link in Module 8 named \"Case 2 Assignment Submission\". The grading will be based on: Quality of analysis: Have you analyzed all the pertinent issues correctly and avoided obvious repetition of facts in the case? Quality of recommendations: Have you offered specific plans of action and backed these up with strong arguments? Writing: Do you present the material in a logical, clear way with no grammar/spelling errors? Your write-up should begin with an opening paragraph that synopsizes the case, and answer all the following questions: 1. What are the advantages and disadvantages of being a private company? (1 points) 2. What is the total firm value of Kohler C. using a discounted cash flow approach (5 points)? A two-stage FCFF model is recommended. First estimate FCFF from 1998 until 2002, then assuming FCFF will grow at a constant rate, say 4% after 2002. 1998 1999 2000 2001 2002 Terminal Value EBIT Tax rate Taxes EBIT*(1-t) Depareciation & Amortization Net Capital expenditure Change in net working capital 43.4% 43.4% 43.4% 43.4% 43.4% 1,435 FCFF PV (FCFF) PV (TV) Total firm value i: You can find relevant information in Exhibit 6a, 6b. Note that 1998 information is for 8 month only. Tax rate is estimated by dividing the tax expenses by pretax income in Exhibit 6b. ii: Change in working capital can be estimated using information in Exhibit 6c, add these items up: change in AR, in inventory, in future income tax benefits, in prepaid expenses and other assets, in AP and accrued expenses. If change in net working capital is positive, it means more funds are tied up in working capital. So when you estimate change in net working capital, any item which causes ties-up of money, should be input as positive number, any item which releases fund in working capital, should be input as negative number. iii: Then you should discount the FCFF and TV at the WACC to get PV. So you have to estimate the cost of equity capital and debt capital the pre-tax cost for the firm is 6.6%, which is estimated by dividing interest expense by interest-bearing debt (long-term debt plus current maturing LTD) over the periods and taking the average. You may use information on comparable firms to find the equity beta. Remember to transform comparable firms' beta into asset (all-equity) beta, and then take the average. Assume the tax rate for comparable firms is 40%. Kohler's all-asset beta should be the weighted average of the asset beta in Kitchen&Bathtub segment and in Engine segment. And the weight for Kitchen&Bathtub is 80%, because it generated about 80% ob Kholer's NI, while the weight for Engine segment is 20%. Using the 20-year government bond rate, 6% in Exhibit 8 to proxy for risk-free rate, and the risk premium is 5.5%. Assume that Kholer's D/(D+E) ratio is 25%, which is estimated as the average long-term liability to asset ratio over previous periods in Exhibit 3a. 3. If you were Herbert Kohler, what should be the value per share held by a minority shareholder in Kohler C. using the DCF valuation (1 points)? Consider both the minority discount (assumed to be 20%) and illiquidity discount (the discount for lack of marketability) (assumed to be 40%). 4. What is the total firm value using a multiples approach (3 points)? 5. If you were one of the dissenting shareholders, what should be the value per share held by a minority shareholder in Kohler C. based on the multiple valuation approach (1 points)? Consider 30% control premium. 6. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000 (1 point) ? If the trial proceeds, Kohler estimates that the court will decide the fair value to be $273,000 per share as claimed by the plaintiffs with 70% probability, and $55,400 per share as defended by Herbert Kohler. Case 2 (Kohler Co. case) assignment Reading: Read the Kohler Co. case. This case provides a rich setting in which to learn about the valuation of privately held firms from the perspective of both the controlling shareholder(s) and minority shareholders. Instructions: After you reading the case, connect with your teammates and decide on how best to develop your answers to the questions below. Your answer should be clear and be easy for reader to understand how you find out the answer and why. Just provide a number without explanation will not earn you any point. The teams should map out critical path and ratably distribute work amongst the members. Please adhere to the prescribed format, MS Word, double spaced, Times Roman, or other true-type-font, and include the names of each team member on your final submission. Each team should only submit one document. If you use excel to do the analysis, you may include your excel spreadsheet in the word document. Each team just let one member submit the assignment by submitting it via the link in Module 8 named \"Case 2 Assignment Submission\". The grading will be based on: Quality of analysis: Have you analyzed all the pertinent issues correctly and avoided obvious repetition of facts in the case? Quality of recommendations: Have you offered specific plans of action and backed these up with strong arguments? Writing: Do you present the material in a logical, clear way with no grammar/spelling errors? Your write-up should begin with an opening paragraph that synopsizes the case, and answer all the following questions: 1. What are the advantages and disadvantages of being a private company? (1 points) 2. What is the total firm value of Kohler C. using a discounted cash flow approach (5 points)? A two-stage FCFF model is recommended. First estimate FCFF from 1998 until 2002, then assuming FCFF will grow at a constant rate, say 4% after 2002. 1998 1999 2000 2001 2002 Terminal Value EBIT Tax rate Taxes EBIT*(1-t) Depareciation & Amortization Net Capital expenditure Change in net working capital 43.4% 43.4% 43.4% 43.4% 43.4% 1,435 FCFF PV (FCFF) PV (TV) Total firm value i: You can find relevant information in Exhibit 6a, 6b. Note that 1998 information is for 8 month only. Tax rate is estimated by dividing the tax expenses by pretax income in Exhibit 6b. ii: Change in working capital can be estimated using information in Exhibit 6c, add these items up: change in AR, in inventory, in future income tax benefits, in prepaid expenses and other assets, in AP and accrued expenses. If change in net working capital is positive, it means more funds are tied up in working capital. So when you estimate change in net working capital, any item which causes ties-up of money, should be input as positive number, any item which releases fund in working capital, should be input as negative number. iii: Then you should discount the FCFF and TV at the WACC to get PV. So you have to estimate the cost of equity capital and debt capital the pre-tax cost for the firm is 6.6%, which is estimated by dividing interest expense by interest-bearing debt (long-term debt plus current maturing LTD) over the periods and taking the average. You may use information on comparable firms to find the equity beta. Remember to transform comparable firms' beta into asset (all-equity) beta, and then take the average. Assume the tax rate for comparable firms is 40%. Kohler's all-asset beta should be the weighted average of the asset beta in Kitchen&Bathtub segment and in Engine segment. And the weight for Kitchen&Bathtub is 80%, because it generated about 80% ob Kholer's NI, while the weight for Engine segment is 20%. Using the 20-year government bond rate, 6% in Exhibit 8 to proxy for risk-free rate, and the risk premium is 5.5%. Assume that Kholer's D/(D+E) ratio is 25%, which is estimated as the average long-term liability to asset ratio over previous periods in Exhibit 3a. 3. If you were Herbert Kohler, what should be the value per share held by a minority shareholder in Kohler C. using the DCF valuation (1 points)? Consider both the minority discount (assumed to be 20%) and illiquidity discount (the discount for lack of marketability) (assumed to be 40%). 4. What is the total firm value using a multiples approach (3 points)? 5. If you were one of the dissenting shareholders, what should be the value per share held by a minority shareholder in Kohler C. based on the multiple valuation approach (1 points)? Consider 30% control premium. 6. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000 (1 point) ? If the trial proceeds, Kohler estimates that the court will decide the fair value to be $273,000 per share as claimed by the plaintiffs with 70% probability, and $55,400 per share as defended by Herbert Kohler. Case 2 (Kohler Co. case) assignment Reading: Read the Kohler Co. case. This case provides a rich setting in which to learn about the valuation of privately held firms from the perspective of both the controlling shareholder(s) and minority shareholders. Instructions: After you reading the case, connect with your teammates and decide on how best to develop your answers to the questions below. Your answer should be clear and be easy for reader to understand how you find out the answer and why. Just provide a number without explanation will not earn you any point. The teams should map out critical path and ratably distribute work amongst the members. Please adhere to the prescribed format, MS Word, double spaced, Times Roman, or other true-type-font, and include the names of each team member on your final submission. Each team should only submit one document. If you use excel to do the analysis, you may include your excel spreadsheet in the word document. Each team just let one member submit the assignment by submitting it via the link in Module 8 named \"Case 2 Assignment Submission\". The grading will be based on: Quality of analysis: Have you analyzed all the pertinent issues correctly and avoided obvious repetition of facts in the case? Quality of recommendations: Have you offered specific plans of action and backed these up with strong arguments? Writing: Do you present the material in a logical, clear way with no grammar/spelling errors? Your write-up should begin with an opening paragraph that synopsizes the case, and answer all the following questions: 1. What are the advantages and disadvantages of being a private company? (1 points) 2. What is the total firm value of Kohler C. using a discounted cash flow approach (5 points)? A two-stage FCFF model is recommended. First estimate FCFF from 1998 until 2002, then assuming FCFF will grow at a constant rate, say 4% after 2002. 1998 1999 2000 2001 2002 Terminal Value EBIT Tax rate Taxes EBIT*(1-t) Depareciation & Amortization Net Capital expenditure Change in net working capital 43.4% 43.4% 43.4% 43.4% 43.4% 1,435 FCFF PV (FCFF) PV (TV) Total firm value i: You can find relevant information in Exhibit 6a, 6b. Note that 1998 information is for 8 month only. Tax rate is estimated by dividing the tax expenses by pretax income in Exhibit 6b. ii: Change in working capital can be estimated using information in Exhibit 6c, add these items up: change in AR, in inventory, in future income tax benefits, in prepaid expenses and other assets, in AP and accrued expenses. If change in net working capital is positive, it means more funds are tied up in working capital. So when you estimate change in net working capital, any item which causes ties-up of money, should be input as positive number, any item which releases fund in working capital, should be input as negative number. iii: Then you should discount the FCFF and TV at the WACC to get PV. So you have to estimate the cost of equity capital and debt capital the pre-tax cost for the firm is 6.6%, which is estimated by dividing interest expense by interest-bearing debt (long-term debt plus current maturing LTD) over the periods and taking the average. You may use information on comparable firms to find the equity beta. Remember to transform comparable firms' beta into asset (all-equity) beta, and then take the average. Assume the tax rate for comparable firms is 40%. Kohler's all-asset beta should be the weighted average of the asset beta in Kitchen&Bathtub segment and in Engine segment. And the weight for Kitchen&Bathtub is 80%, because it generated about 80% ob Kholer's NI, while the weight for Engine segment is 20%. Using the 20-year government bond rate, 6% in Exhibit 8 to proxy for risk-free rate, and the risk premium is 5.5%. Assume that Kholer's D/(D+E) ratio is 25%, which is estimated as the average long-term liability to asset ratio over previous periods in Exhibit 3a. 3. If you were Herbert Kohler, what should be the value per share held by a minority shareholder in Kohler C. using the DCF valuation (1 points)? Consider both the minority discount (assumed to be 20%) and illiquidity discount (the discount for lack of marketability) (assumed to be 40%). 4. What is the total firm value using a multiples approach (3 points)? 5. If you were one of the dissenting shareholders, what should be the value per share held by a minority shareholder in Kohler C. based on the multiple valuation approach (1 points)? Consider 30% control premium. 6. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000 (1 point) ? If the trial proceeds, Kohler estimates that the court will decide the fair value to be $273,000 per share as claimed by the plaintiffs with 70% probability, and $55,400 per share as defended by Herbert Kohler. Case 2 (Kohler Co. case) assignment Reading: Read the Kohler Co. case. This case provides a rich setting in which to learn about the valuation of privately held firms from the perspective of both the controlling shareholder(s) and minority shareholders. Instructions: After you reading the case, connect with your teammates and decide on how best to develop your answers to the questions below. Your answer should be clear and be easy for reader to understand how you find out the answer and why. Just provide a number without explanation will not earn you any point. The teams should map out critical path and ratably distribute work amongst the members. Please adhere to the prescribed format, MS Word, double spaced, Times Roman, or other true-type-font, and include the names of each team member on your final submission. Each team should only submit one document. If you use excel to do the analysis, you may include your excel spreadsheet in the word document. Each team just let one member submit the assignment by submitting it via the link in Module 8 named \"Case 2 Assignment Submission\". The grading will be based on: Quality of analysis: Have you analyzed all the pertinent issues correctly and avoided obvious repetition of facts in the case? Quality of recommendations: Have you offered specific plans of action and backed these up with strong arguments? Writing: Do you present the material in a logical, clear way with no grammar/spelling errors? Your write-up should begin with an opening paragraph that synopsizes the case, and answer all the following questions: 1. What are the advantages and disadvantages of being a private company? (1 points) 2. What is the total firm value of Kohler C. using a discounted cash flow approach (5 points)? A two-stage FCFF model is recommended. First estimate FCFF from 1998 until 2002, then assuming FCFF will grow at a constant rate, say 4% after 2002. 1998 1999 2000 2001 2002 Terminal Value EBIT Tax rate Taxes EBIT*(1-t) Depareciation & Amortization Net Capital expenditure Change in net working capital 43.4% 43.4% 43.4% 43.4% 43.4% 1,435 FCFF PV (FCFF) PV (TV) Total firm value i: You can find relevant information in Exhibit 6a, 6b. Note that 1998 information is for 8 month only. Tax rate is estimated by dividing the tax expenses by pretax income in Exhibit 6b. ii: Change in working capital can be estimated using information in Exhibit 6c, add these items up: change in AR, in inventory, in future income tax benefits, in prepaid expenses and other assets, in AP and accrued expenses. If change in net working capital is positive, it means more funds are tied up in working capital. So when you estimate change in net working capital, any item which causes ties-up of money, should be input as positive number, any item which releases fund in working capital, should be input as negative number. iii: Then you should discount the FCFF and TV at the WACC to get PV. So you have to estimate the cost of equity capital and debt capital the pre-tax cost for the firm is 6.6%, which is estimated by dividing interest expense by interest-bearing debt (long-term debt plus current maturing LTD) over the periods and taking the average. You may use information on comparable firms to find the equity beta. Remember to transform comparable firms' beta into asset (all-equity) beta, and then take the average. Assume the tax rate for comparable firms is 40%. Kohler's all-asset beta should be the weighted average of the asset beta in Kitchen&Bathtub segment and in Engine segment. And the weight for Kitchen&Bathtub is 80%, because it generated about 80% ob Kholer's NI, while the weight for Engine segment is 20%. Using the 20-year government bond rate, 6% in Exhibit 8 to proxy for risk-free rate, and the risk premium is 5.5%. Assume that Kholer's D/(D+E) ratio is 25%, which is estimated as the average long-term liability to asset ratio over previous periods in Exhibit 3a. 3. If you were Herbert Kohler, what should be the value per share held by a minority shareholder in Kohler C. using the DCF valuation (1 points)? Consider both the minority discount (assumed to be 20%) and illiquidity discount (the discount for lack of marketability) (assumed to be 40%). 4. What is the total firm value using a multiples approach (3 points)? 5. If you were one of the dissenting shareholders, what should be the value per share held by a minority shareholder in Kohler C. based on the multiple valuation approach (1 points)? Consider 30% control premium. 6. What is the maximum share price at which Herbert Kohler should be willing to settle with the dissenting shareholders in order to stop the trial on April 11, 2000 (1 point) ? If the trial proceeds, Kohler estimates that the court will decide the fair value to be $273,000 per share as claimed by the plaintiffs with 70% probability, and $55,400 per share as defended by Herbert Kohler