Problem 1 See financial statement data and stock price data for Mydeco Corp. Mydeco Corp. 2012-2016 (All data as of fiscal year end; $ in millions) Income Statement Revenue Cost of Goods Sold 2012 404.3 2013 (188.3) 363.8 (173.8) 2014 424.6 (206.2) Gross Profit 216.0 190.0 218.4 2015 510.7 (246.8) 263.9 2016 Sales and Marketing (66.7) (66.4) (82.8) (102.1) Administration (60.6) (59.1) (59.4) (66.4) 604.1 (293.4) 310.7 (120.8) (78.5) Depreciation & Amortization (27.3) (27.0) (34.3) (38.4) (38.6) EBIT 61.4 37.5 41.9 57.0 Interest Income (Expense) (33.7) (32.9) (32.2) (37.4) 72.8 (39.4) Pretax Income 27.7 4.6 9.7 19.6 33.4 Income Tax (9.7) (1.6) (3.4) (6.9) (11.7) Net Income 18.0 3.0 6.3 12.7 21.7 Shares outstanding (millions) 55.0 55.0 55.0 55.0 $5.0 Earnings per share $0.33 $0.05 $0.11 $0.23 $0.39 Balance Sheet 2012 2013 2014 2015 2016 Assets Cash 48.8 68.9 86.3 77.5 85.0 Accounts Receivable 88.6 69.8 69.8 76.9 86.1 Inventory 33.7 30.9 28.4 31.7 Total Current Assets 171.1 169.6 184.5 186.1 35.3 206.4 Net Property, Plant & Equip. 245.3 243.3 309.0 345.6 347.0 Goodwill & Intangibles 361.7 361.7 361.7 361.7 361.7 Total Assets 778.1 774.6 855.2 893.4 915.1 Liabilities & Stockholders' Equity Accounts Payable 18.7 17.9 22.0 26.8 31.7 Accrued Compensation 6.7 6.4 7.0 8.1 9.7 Total Current Liabilities 25.4 24.3 29.0 34.9 41.4 Long-term Debt 500.0 500.0 575.0 600.0 600.0 Total Liabilities 525.4 524.3 604.0 634.9 641.4 Stockholders' Equity 252.7 250.3 251.2 258.5 273.7 Total Liabilities 778.1 774.6 855.2 893.4 915.1 & Stockholders' Equity Statement of Cash Flows 2012 2013 2014 2015 2016 Net Income 18.0 3.0 6.3 12.7 21.7 Depreciation & Amortization 27.3 27.0 34.3 38.4 38.6 Chg. in Accounts Receivable 3.9 18.8 0.0 (7.1) (9.2) Chg. in Inventory (2.9) 2.8 2.5 (3.3) (3.6) Chg. in Payables & Accrued Comp. 2.2 (1.1) 4.7 5.9 6.5 Cash from Operations 48.5 50.5 47.8 46.6 54.0 Capital Expenditures (25.0) (25.0) (100.0) (75.0) (40.0) Cash from Investing Activities (25.0) (25.0) (100.0) (75.0) (40.0) Dividends Paid (5.4) (5.4) (5.4) (5.4) (6.5) Sale (or purchase) of stock Debt issuance (Pay Down) 75.0 25.0 a) What is Mydeco's market capitalization at the end of each year 2014 to 2016? V b) What is Mydeco's enterprise value (market cap plus long term debt minus cash) at the end of each year 2014 to 2016? c) What is Mydeco's long term net debt to enterprise value ratio at the end of each year 2014 to 2016? d) Compute the Free Cash Flows (FCFs) of each year 2014 to 2016? You get the FCFS as "Cash from Operations for a (hypothetical) unlevered firm" plus "Cash from Investing Activities". e) Take Mydeco's enterprise value at the end of year 2016, the FCF 2016 as forecast for the FCF 2017 and assume a constant growth rate of 2% from 2017 to infinity. What is the WACC that solves the valuation equation for Mydeco's enterprise Cash from Financing Activities (5.4) (5.4) 69.6 19.6 (6.5) value at the end of Change in Cash 18.1 20.1 17.4 (8.8) 7.5 year 2016? Mydeco Stock Price $7.92 $3.30 $5.25 $8.71 $10.89