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Web site. The Henley Corporation is a privately held company specializing in lawncare products and services. The most recent financial statements are shown below.Income Statement for the Year Ending December 31 (Millions of Dollars Except for Per Share Data) 2010 Net sales $ 800.0 Costs (except depreciation) 576.0 Depreciation 60.0 Total operating costs $ 636.0 Earnings before interest and taxes $ 164.0 Less interest 32.0 Earnings before taxes $ 132.0 Taxes (40%) 52.8 Net income before preferred dividends $ 79.2 Preferred dividends 1.4 Net income available for common dividends $ 77.9 Common dividends $ 31.1 Addition to retained earnings $ 46.7 Number of shares (in millions) 10 Dividends per share $ 3.11 Balance Sheet for December 31 (Mi llions of Dol lars) 2010 2010 Assets Liabilities and Equity 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 Common stock (par plus PIC) 257.0 Retained earnings 200.0 Common equity $457.0 Total assets $868.0 Total liabilities and equity $868.0 Projected ratios and selected information for the current and projected years are shown below. Actual Projected 2010 2011 2012 2013 2014 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 resource Chapter 13: Corporate Valuation, Value-Based Management and Corporate Governance 553 9781133665007, Financial Management: Theory and Practice, Michael C. Ehrhardt - © Cengage Learning. r igthuts Noa diastrnibu tikoni arllkowked h ovut aeuthto riozatsion Actual Projected 2010 2011 2012 2013 2014 Accounts receivable/Sales 10% 10% 10% 10% 10% Inventories/Sales 20 20 20 20 20 Net PPE/Sales 75 75 75 75 75 Accounts payable/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 a. Forecast the parts of the income statement and balance sheet that are necessary forcalculating free cash flow. b. Calculate free cash flow for each projected year. Also calculate the growth rates of freecash flow each year to ensure that there is constant growth (that is, the same as theconstant growth rate in sales) by the end of the forecast period. c. Calculate operating profitability (OP = NOPAT/Sales), capital requirements (CR =Operating capital/Sales), and expected return on invested capital (EROIC = ExpectedNOPAT/Operating capital at beginning of year). Based on the spread betwe enEROICand WACC, do you think that the company will have a positive Market Value Added (MVA = Market value of company - Book value of company = Value of operations - Operating capital)? d. Calculate the value of operations and MVA. (Hint: First calculate the horizon value atthe end of the forecast period, which is equal to the value of operations at the end ofthe forecast period.) Assume that the annual growth rate beyond the horiz
Wrenn Corp. has 5.6 million shares outstanding, interest expenses of $4.4 million, and depreciation expenses of $3.7 million. What is Wrenn's operating income if the dividend per share is $0.80 and the dividend payout ratio is 35%?
The D. J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new store. What is the effective annual interest rate of the costly trade credit?
Determine the relevant after-tax cash flows and prepare a cash flow schedule.
What is the dividend yield? (Round your answer to 2 decimal places. What is the expected capital gains yield?
What percentage of the company's capital structure consists of debt? Round your answer to two decimal places.
A firm is reviewing a project with labor cost of $9.90 per unit, raw materials cost of $22.63 a unit, and fixed costs of $8,000 a month. Calculate the total variable costs of the project.
Dade buy a patent on January 1, 2003 for $120,000. The patent had a remaining useful life of ten years at that date. In January 2004, Dade successfully defends patent at a cost of $54,000,
For the following income statement and balance sheet, fill in the missing data for the calendar year ending December 31.
Suppose that your company will be receiving 30 million euros six months from now and the euro is currently selling for 1 euro per dollar. If you want to hedge the foreign exchange risk in this payment
Suppose a stock had an initial price of $80 per share, paid a dividend of $1.35 per share during the year, and had an ending share price of $87. What was the capital gains yield?
which job pays the higher salary? 4. A firm has 40,000,000 in revenues, 12,500,000 in fixed costs, 10,250,000 in variable costs, and interest of 2,000,000. Compute the DOL, DFL, and DCL. Please show all work.
Preferred stockholders do not participate in the receivings of the corporation beyond the stated rate in the way that common stockholders do.
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