Sora Industries has 60 million outstanding shares, $120 million in debt, $40 million in cash, and the following projected free cash flow for the next four years:Year234Earnings and FCF Forecast ($ million)1 Sales433.0468.0516.0547.0574.32 Growth vs. Prior Year8.1%10.3%6.0%5.0%3 Cost of Goods Sold(313.6)(345.7)(366.5)180.5(384.8)4 Gross Profit154.4170.3189.5(93.6)(7.0)(103.2)(7.5)(109.4)(9.0)5 Selling, General, & Admin.6 Depreciation7 EBIT8 Less: Income Tax at 40%9 Plus: Depreciation(114.9)(9.5)53.859.662.165.2(21.5)(23.8)(24.8)(26.1)7.07.59.09.5 9 Plus: Depreciation7.07.59.09.510 Less: Capital Expenditures(7.7)(6.3)(10.0)(8.6)(9.9)(5.6)(10.4)(4.9)11 Less: Increase in NWC12 Free Cash Flow25.324.630.833.3a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.0% rate beyond year four. If Sora's weighted average cost of capital is 10.0%, what is the value of Sora stock based on this information?b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change?c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would youestimate now? (Assume no other expenses, except taxes, are affected.)d. Sora's net working capital needs were estimated to be 18% of sales (their current level in year zero). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions are as in (a), what stock price do you estimate for Sora?(Hint: This change will have the largest impact on Sora's free cash flow in year 1.)a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.0% rate beyond year four. If Sora's weighted average cost of capital is 10.0%, what is the value of Sora stock based on this information?The stock price for this case is $. (Round to the nearest cent.)b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change?The stock price for this case, when COGS increases, is $ (Round to the nearest cent.)c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would youestimate now? (Assume no other expenses, except taxes, are affected.)The stock price for this case, when selling, general, and administrative costs decrease, is $ . (Round to the nearest cent.)d. Sora's net working capital needs were estimated to be 18% of sales (their current level in year zero). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions are as in (a), what stock price do you estimate for Sora?(Hint: This change will have the largest impact on Sora's free cash flow in year 1.)The stock price for this case, when working capital needs are reduced, is S (Round to the nearest cent.)

Sora Industries has 60 million outstanding shares, $120 million in debt, S40 million in cash, and the following proj Year 1 3 4 Earnings and FCF Forecast ($ million) 1 Sales 433.0 468.0 516.0 547.0 574.3 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0%

Sora Industries has 60 million outstanding shares, $120 million in debt, S40 million in cash, and the following proj Year 1 3 4 Earnings and FCF Forecast ($ million) 1 Sales 433.0 468.0 516.0 547.0 574.3 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0%

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Stricklers sales last year were 3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was 1,800,000. The firm had fixed assets totaling 535,000. Stricklers payables deferral period is 45 days. a. Calculate Stricklers cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Stricklers managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Stricklers cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
The forecast for Global Exports’ free cash flows for next year is provided in the table below. Selected Financial Information Global Exports Inc. ($000s) Last Year Next Year Operating Cash Flow 74,230 78,076 Net Working Capital -12,240 -13,460 CAPEX 8,720 15,400 Debt 80,100 100,200 Shares Outstanding 10,000 10,000 Assume that free cash flow is paid at the end of each year and we are at the beginning of next year. Last year’s values are for the year end yesterday. Analysts expect Global Exports’ cash flow to grow at 3% in perpetuity. The WACC for Global is 11%. What is the fair price for Global Exports’ shares today? Responses $62.37 $62.37 $69.85 $69.85 $73.27 $73.27 $71.86 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The forecast for Global Exports' free cash flows for next year is provided in the table below. Selected Financial Information Global Exports Inc. ($000s) Operating Cash Flow Net Working Capital CAPEX Debt Shares Outstanding O $62.37 O $73.27 Assume that free cash flow is paid at the end of each year and we are at the beginning of next year. Last year's values are for the year end yesterday. Analysts expect Global Exports' cash flow to grow at 3% in perpetuity. The WACC for Global is 11%. What is the fair price for Global Exports' shares today? O $69.85 Last Year O $71.86 74,230 -12,240 8,720 80,100 10,000 Next Year 78,076 -13,460 15,400 100,200 10,000
A company expects sales of $420 million next year assuming a 20% increase from the previous year. The firm anticipates $29.17 million in retained earnings after taxes and dividends have been paid, assuming that $1 million in depreciation expense have been deducted. Working capital is expected to represent 40% of change in sales. Required: Determine the amount of surplus (or deficit) in funds. k (INPUT YOUR ANSWER IN K, ROUNDED TO 2 DECIMAL PLACES. FOR EXAMPLE: 1.23. USE THE MINUS SIGN TO INDICATE A NEGATIVE ANSWER. FOR EXAMPLE: -1.23)
A company is projected to generate revenues of $304 million and $423 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 43.2%. Forecasted tax rate: 18.3%. Forecasted reinvestment rate: 57%. Forecasted steady growth rate of free cash flow: 1.7% per year. Cost of capital: 9.2%. Debt: $34 million. Cash: $29 million. Shares outstanding: 13 million.
Using AFN formula in financial forecasting approach, given the following accounting information assuming that the firm's profit margin remains constant and the company is at full capacity. Sales = 6,000,000 Percentage increase projected for next year sales = 20% Net income this year = 600,000 Retention ratio = 50% Accounts Payabale = 1,100,000 Notes Payable = 180,000 Accrued expenses = 500,000 Projected excess funds available next year is = 200,000 Spontaneous liabilities increase is?
Sora Industries has 62 million outstanding shares, $130 million in debt, $51 million in cash, and the following projected free cash flow for the next four years: Year Earnings and FCF Forecast ($ million) 1 Sales 2 Growth vs. Prior Year 3 Cost of Goods Sold 4 Gross Profit 5 Selling, General, & Admin. 6 Depreciation 7 EBIT 8 Less: Income Tax at 40% 0 433.0 1 468.0 8.1% (313.6) 154.4 (93.6) (7.0) 53.8 (21.5) 2 516.0 10.3% (345.7) 170.3 (103.2) (7.5) 59.6 (23.8) 3 547.0 6.0% (366.5) 180.5 (109.4) (9.0) 62.1 (24.8) 4 574.3 5.0% (384.8) 189.5 (114.9) (9.5) 65.2 (26.1) a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.6% rate beyond year four. If Sora's weighted average cost of capital is 11.0%, what is the value of Sora stock based on this information? The stock price for this case is $. (Round to the nearest cent.)
Using AFN formula in financial forecasting approach, given the following accounting information assuming that the firm's profit margin remains constant and the company is at full capacity. Sales = 6,000,000 Percentage increase projected for next year sales = 20% Net income this year = 600,000 Retention ratio = 50% Accounts Payabale = 1,100,000 Notes Payable = 180,000 Accrued expenses = 500,000 Projected excess funds available next year is = 200,000 Total assets amounted to?
Suppose that Gyp Sum Industries currently has the balance sheet shown below, and that sales for the year just ended were $10 million. The firm also has a profit margin of 25 percent, a retention ratio of 30 percent, and expects sales of $8 million next year. Assets Current assets Fixed assets Total assets Liabilities and Equity Additional funds needed Current liabilities $2,000,000 4,000,000 Long-term debt Equity $6,000,000 Total liabilities and equity $1,500,000 1,500,000 3,000,000 $6,000,000 If all assets and current liabilities are expected to shrink with sales, what amount of additional funds will Gyp Sum need from external sources to fund the expected growth? (Enter your answer in dollars not in millions. Negative amount should be indicated by a minus sign.)
Using the AFN formula in financial forecasting approach, Determine the following for Piano Co. given the following accounting information assuming that the firm’s profit margin remains constant and the company is at full capacity. · Sales this year is P6,000,000· Percentage increase projected for next year sales = 20%· Net income this year amounts to P600,000· Retention ratio = 50%· Accounts payable = P1,100,000· Notes payable = P180,000· Accrued expenses = P500,000· Projected excess funds available next year is determined to be P200,000 Questions: 1. Determine the spontaneous liabilities increase. 2. How much is the increase in Retained Earnings? 3. How much is the total assets?
The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here: Sales Costs Taxable income Taxes Net income Dividends Addition to retained earnings Current assets Fixed assets Total assets Assets Current assets Fixed assets INCOME STATEMENT Total assets $ 7,230,000 18,390,000 $ 1,149,982 1,724,853 Assets b-2. External financing needed c. Sustainable growth rate $ 25,620,000 a. Calculate the external funds needed for next year using the equation from the chapter. Note: Do not round intermediate calculations. External financing needed b-1. Prepare the firm's pro forma balance sheet for next year. Note: Do not round intermediate calculations. BALANCE SHEET Short-term debt Long-tern debt Common stock Accumulated retained earnings $ 30,500,000 26,077,300 $ 4,422,700 1,547,945 $ 2,874,755 Liabilities and Equity Total equity Total liabilities and…