This model provides answers to the end-of-the-chapter spreadsheet problem.

Inputs	Actual	Projected	Projected	Projected	Projected
	2015	2016	2017	2018	2019
Sales Growth Rate		15%	10%	6%	6%
Costs / Sales	72%	72%	72%	72%	72%
Depreciation / Net PPE	10%	10%	10%	10%	10%
Cash / Sales	1%	1%	1%	1%	1%
Acct. Rec. / Sales	10%	10%	10%	10%	10%
Inventories / Sales	20%	20%	20%	20%	20%
Net PPE / Sales	75%	75%	75%	75%	75%
Acct. Pay. / Sales	2%	2%	2%	2%	2%
Accruals / Sales	5%	5%	5%	5%	5%
Tax rate	40%	40%	40%	40%	40%
Weighted average cost of capital (WACC)	10.5%	10.5%	10.5%	10.5%	10.5%
Income Statement for the Year Ending December 31 (Millions of Dollars)
	2015
Net Sales	$ 800.0
Costs (except depreciation)	$ 576.0
Depreciation	$ 60.0
Total operating costs	$ 636.0
Earning before int. & tax	$ 164.0
Less interest	$ 32.0
Earnings before taxes	$ 132.0
Taxes (40%)	$ 52.8
Net income before pref. div.	$ 79.2
Preferred div.	$ 1.4
Net income avail. for com. div.	$ 77.9
Common dividends	$ 31.1
Addition to retained earnings	$ 46.7
Number of shares (in millions)	10
Dividends per share	$ 3.11
Balance Sheets for December 31 (Millions of Dollars)
Assets	2015	Liabilities and Equity		2015
Cash	$ 8.0	Accounts Payable		$ 16.0
Marketable Securities	20.0	Notes payable		40.0
Accounts receivable	80.0	Accruals		40.0
Inventories	160.0	Total current liabilities		$ 96.0
Total current assets	$ 268.0	Long-term bonds		$ 300.0
Net plant and equipment	600.0	Preferred stock		$ 15.0
Total Assets	$ 868.0	Common Stock (Par plus PIC)		$ 257.0
		Retained earnings		200.0
		Common equity		$ 457.0
		Total liabilities and equity		$ 868.0

c. Calculate the return on invested capital (ROIC=NOPAT/Total net operating capital) and the growth rate in free cash flow. What is the ROIC in the last year of the forecast? What is the long-term constant growth rate in free cash flow (gL is the growth rate in FCF in the last forecast period because all ratios are constant)? Do you think that Hensley's value would increase if it could add growth without reducing its ROIC? (Hint: Growth will add value if the ROIC > WACC/[1+WACC]). Do you think that the company will have a value of operations greater than its total net operating capital? (Hint: Is ROIC > WACC/[1+gL]?)

d. Calculate the current value of operations. (Hint: First calculate the horizon value at the end of the forecast period, which is equal to the value of operations at the end of the forecast period. Assume that the annual growth rate beyond the horizon is equal to the growth rate at the horizon.) How does the current value of operations compare with the current amount of total net operating capital?

e. Calculate the price per share of common equity as of 12/31/2015