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You have been hired by Shovein Asset Management Co. to be an equity analyst. Your job is to value the following company and ultimately issue
| You have been hired by Shovein Asset Management Co. to be an equity analyst. Your job is to value | ||||||||
| the following company and ultimately issue a BUY / HOLD / SELL recommendation for our clients. | ||||||||
| COMPANY DATA: | ||||||||
| Current Stock Price = | $40.00 | Number of Outstanding Shares = | 50,000 | |||||
| Total Assets = | $10,000,000 | Total Equity = | $7,000,000 | |||||
| Last Dividend Paid / share = | $1.50 | Forecasted Growth Rate (after yr. 5) = | 3.0% | |||||
| Tax Rate = | 30% | |||||||
| Required Rate (WACC) = | 8.0% | |||||||
| You have forecasted certain Income Statement and Balance Sheet information for the next 5 years: | ||||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||
| Sales | $1,000,000 | $1,100,000 | $1,250,000 | $1,400,000 | $1,600,000 | |||
| Operating Costs (excl. Dep.) | $600,000 | $660,000 | $750,000 | $840,000 | $960,000 | |||
| Depreciation Expense | $150,000 | $160,000 | $175,000 | $190,000 | $200,000 | |||
| Capital Expenditures | $175,000 | $175,000 | $200,000 | $200,000 | $220,000 | |||
| Increase in Current Assets | $20,000 | $25,000 | $30,000 | $40,000 | $50,000 | |||
| Increase in Current Liabilities | $15,000 | $15,000 | $20,000 | $20,000 | $30,000 | |||
| What is your valuation using the DCF Model? | ||||||||
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