Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 13, Problem 18PC
a
To determine
Calculate the value of Steak ’n Shake as on January 1, year +1 using residual income model.
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Chapter 13 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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- Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site. Selected data for the Derby Corporation are shown here. Use the data to answer the following questions. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Calculate the estimated Year-0 price per share of common equity.arrow_forwardAn estimate has the following cost and revenue cash flows. The cash flows are assumed to occur at the end of the year. (a) If interest is 10%, find the net present worth, net future worth, and net annual equivalentworth.(b) Find the rate of return. (Hint: The guessing range is 25 to 30%).(c) Present a summary of the four methods Year Cost Revenue 0 $800 $0 1 - $450 2 - $425 3 - $400arrow_forwardGive typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).arrow_forward
- 7. Assume that you have full year forecasted financials for 2019 - 2024 (planning period) and the following financials for after the planning period: • NOPAT (last year of planning period) = 90 • Long term growth rate = 2% • Long term ROCB = 11% • WACC = 8% What is the present value (at December 2018) of the terminal value of this company using the Key Value Driver Formula? Please round your answer to the nearest whole number and provide your answer in USD millions without a dollar sign (e.g. 100 instead of $100).arrow_forwardGive only typing answer with explanation and conclusion to all parts Assume that Abiproffy has a $112.5 million capital budget planned for the coming year. You have determined its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution model approach to determine Abiproffy’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Abiproffy has 100 million shares. Answer the following questions. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million? In general terms, how would a change in investment opportunities affect the payout ratio under the residual payment policy?arrow_forwardCalculate the APR of the following investment, entered as a percentage (Example: if your answer is 14.5%, enter 14.5 and not 0.145) Year Number Cashflow 0 -11000 1 3000 2 3500 3 2900 4 2800arrow_forward
- Suppose you makes a $1,000 initial investment today, a $4,000 additional investment at the end of year one, and another $500 investment at the end of year two. You had returns of 10% in year one, 2% in year two, and -5% in year three. What is the dollar-weighted average return on your investments? Select one: a. -2.59% b. 10.00% c. 0.51% d. -0.73% e. 3.00%arrow_forwardFind the profitability index (PI) for the following series of future cash flows, assuming the company’s cost of capital is 14.12 percent. The initial outlay is $418,044. Year 1: $164,390 Year 2: $152,563 Year 3: $195,331 Year 4: $199,028 Year 5: $175,965arrow_forwardIf the net working capital required is 83.3 and the difference between current assets and current liabilities is 70, then what is the contingency rate? Select one: a. 0.190 b. 1.190 c. 0.160 d. All the given choices are not correct e. 0.27 Use the following information from Salalah Mills Company to calculate Compounded Annual Growth Rate (CAGR). Beginning value=OMR. 590, End of Year 1= OMR 610, End of Year 2=OMR 640, End of Year 3=OMR 660, End of Year 4= OMR 680. Select one: a. None of the options b. 3.61% c. 2.35% d. 2.50% e. 3.10%arrow_forward
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