Use the most appropriate valuation model to calculate the expected share price of ABC Corporation using all the variables provided. (round your final answer to two decimal points)
Table 1-Statement of Financial Statement ABC Corporation Statement of Financial Position As at Dec 31, 2019 2018 ASSETS Current assets Cash Account receivable Inventories Total current assets Equipment Accumulated depreciation TOTAL ASSETS $ 19,050 $ 11,250 45,200 57,700 76,500 49,000 140,750 117,950 127,000 62,000 (25,200) (35,000) $ 242,550 $ 144,950 LIABILITIES & SHAREHOLDERS' EQUITIES Current liabilities Account payable $ 38,600 $ 36,200 Income tax payable 1,200 3,800 Dividend payable 3,200 5,200 Total current liabilities 43,000 45,200 Loan payable 43,000 36,000 Common shares 50,000 40,000 Retained earnings 106,550 23,750 TOTAL LIABILITIES & SHAREHOLDERS' EQUITIES S 242,550 $ 242,550 Table 2 - Statement of Income Table 2-2 Alternative Statement of Income ABC Corporation Statement of Income For the year ended Dec 31, 2019 ABC Corporation Statement of Income For the year ended Dec 31, 2019 $ 480,000 305,000 175,000 Sales revenue Variable costs Contribution margin Fixed costs $ 480,000 155,980 324,020 233,970 3,900 13,250 7,600 10,2000 90,050 90,050 Sales revenue Cost of goods sold Gross profit Expense Wages expense Rent expense Utilities expense Depreciation expense Income from Operation Other revenue and expense Gain on sale of equipment Interest expense Income before income tax Income tax expense Net income Total common shares EPS 3,900 3,900 (2,970) 90,980 Income from Operation Other revenue and expense Gain on sale of equipment Interest expense Income before income tax Income tax expense Net Income Total common shares EPS (2,970) 90,980 4,980 $ 86,000 100,000 $0.86 4,980 $ 86,000 100,000 $0.86 Table -3 Statement of Cash Flow ABC Corporation Statement of Cash Flow For the year ended Dec 31, 2019 Cash flow from operating activities: Net Income Add: depreciation expense Less: gain on sale of equipment Add: decrease in account receivable Less: increase in inventory Add: increase in account payable Decrease in income tax payable Net cash provided(used) by operation $ 86,000 10,200 (3,900) 12,500 (27,500) 2,400 (2,600) $77,100 Cash flows from investing activities: Add: proceeds from the sale of equipment Less: Purchase of equipment Net cash provided(used) in investing activities 8,900 (90,000) $ (81,000) Cash flows from financing activities: Less: payment of dividends Add: Proceeds of borrowing - loan payable Add: Proceeds from issuing common stocks Net cash provided (used) by financing activities Total net change in cash (5,200) 7,000 10,000 $ 11,800 $ 7,800 Ending cash Opening cash Net change in Cash $ 19,050 11,250 $ 7,800 Table 4-Industry Statistics Baby Fumlture Industry Average Statistics Current ratio 2.5 Quick ratio 1.2 Inventory turn-over 5.5 Total assets turn-over 1.15 Profit margin 10% Return on assets 20% 15% Return on equity Total debt to equity I 0.40 P/E ratio 14 D.O.L. 5 D.F.L. 2.5 Table 5- Major baby furniture maker comparison ABC Corp Mike's Furniture Baby Paradise Annual growth in EPS 25% 10% 8% ROE 16% 18% 15% ROA 18% 17% 1393 Debt to total asset 3696 68% 25% Market Value ? $70.5 $24.25 Book Value $1.57 $50.25 $19.5 10% 2.18% 5.26% Dividend Yield P/Eratio 24.1 14.2
