Question 1 Jupiter Corporation has developed a revolutionary auto part production process that enables it to increase production by 20 % more than its competitors. It has invested $100 million worth of machineries in its new plant. To finance its investment, Jupiter borrowed $ 30 million from OCBC Bank and raised the rest by issuing new shares. The company's current total share outstanding is 100 million shares. Investors are very excited about the future prospect of Jupiter Corp. with this new invention. They believe that the flow of future profit from the new plant will justify a share price of $ 56.00 per share. The company's latest balance sheet is as follows. Balance Sheet statement of Jupiter Corp. as at 31st December, 2017 ($' million) Cash Accounts receivable Inventory Current assets $ 195,000 137,000 264,000 596,000 Accounts payable Notes payable Current liabilities Long term debt Total liabilities $ 405,000 160.000 565,000 1.195,300 1,760,300 Tangible net fixed assets Intangible net fixed assets 2,800,000 780,000 Common stocks 481,700 Accu, retained earnings 1.934.000 Total liab.& owners' equity 4.760,000 Total assets 4,760,000 Income statement of Jupiter Corp. as at 31st December, 2017 ($' million) Sales Costs Depreciation EBIT $ 586,000 247,000 43,000 296,000 32,000 264,000 92,400 Interest EBT Tax (35%) Question 1 Required: a) Assume that the company's board of directors decided to declare a dividend pay-out of $ 0.34 per share to all its shareholders. Calculate the following and explain their impacts on the financial statements of Jupiter Corporation. The total retained earnings of the company in 2018. ii) Enterprise value of the company as at 2017. iii) The operation cash flow of the company in 2017. [10 marks] i) b) Using the information from the financial statements provided above, calculate the following ratios and comment on their effects on the share price of Jupiter Corporation Earnings per Share (EPS) ii) Price Earnings Ratio (PE) iii) Market to Book value per share (MTB) [10 marks] i) Question 1 Jupiter Corporation has developed a revolutionary auto part production process that enables it to increase production by 20 % more than its competitors. It has invested $100 million worth of machineries in its new plant. To finance its investment, Jupiter borrowed $ 30 million from OCBC Bank and raised the rest by issuing new shares. The company's current total share outstanding is 100 million shares. Investors are very excited about the future prospect of Jupiter Corp. with this new invention. They believe that the flow of future profit from the new plant will justify a share price of $ 56.00 per share. The company's latest balance sheet is as follows. Balance Sheet statement of Jupiter Corp. as at 31st December, 2017 ($' million) Cash Accounts receivable Inventory Current assets $ 195,000 137,000 264,000 596,000 Accounts payable Notes payable Current liabilities Long term debt Total liabilities $ 405,000 160.000 565,000 1.195,300 1,760,300 Tangible net fixed assets Intangible net fixed assets 2,800,000 780,000 Common stocks 481,700 Accu, retained earnings 1.934.000 Total liab.& owners' equity 4.760,000 Total assets 4,760,000 Income statement of Jupiter Corp. as at 31st December, 2017 ($' million) Sales Costs Depreciation EBIT $ 586,000 247,000 43,000 296,000 32,000 264,000 92,400 Interest EBT Tax (35%) Question 1 Required: a) Assume that the company's board of directors decided to declare a dividend pay-out of $ 0.34 per share to all its shareholders. Calculate the following and explain their impacts on the financial statements of Jupiter Corporation. The total retained earnings of the company in 2018. ii) Enterprise value of the company as at 2017. iii) The operation cash flow of the company in 2017. [10 marks] i) b) Using the information from the financial statements provided above, calculate the following ratios and comment on their effects on the share price of Jupiter Corporation Earnings per Share (EPS) ii) Price Earnings Ratio (PE) iii) Market to Book value per share (MTB) [10 marks] i)
