(Solution) 13-10) Corporate Valuation The Financial Statements Of Lioi Steel Fabricators Are Shown Belowboth The Actual Results For 2010 And The Projections For... | Snapessays.com


(Solution) 13-10) Corporate Valuation The financial statements of Lioi Steel Fabricators are shown belowboth the actual results for 2010 and the projections for...


13-10)

 

Corporate Valuation

 

The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011. The weighted average cost of capital is 11%.

 

• a.If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for 12/31/2011?

 

• b.What is the horizon value as of 12/31/2011?

 

• c.What is the value of operations as of 12/31/2010?

 

• d.What is the total value of the company as of 12/31/2010?

 

• e.What is the intrinsic price per share for 12/31/2010?

 

Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data

 

Actual 2010 Projected 2011

 

________________________________________

 

Net sales $ 500.0 $ 530.0

 

Costs (except depreciation) 360.0 381.6

 

Depreciation 37.5 39.8

 

Total operating costs $ 397.5 $ 421.4

 

Earnings before interest and taxes $ 102.5 $ 108.6

 

Less interest 13.9 16.0

 

Earnings before taxes $ 88.6 $ 92.6

 

Taxes (40%) 35.4 37.0

 

Net income before preferred dividends $ 53.2 $ 55.6

 

Preferred dividends 6.0 7.4

 

Net income available for common dividends $ 47.2 $ 48.2

 

Common dividends $ 40.8 $ 29.7

 

Addition to retained earnings $ 6.4 $ 18.5

 

Number of shares 10 10

 

Dividends per share $ 4.08 $ 2.97

 

Balance Sheets for December 31 (Millions of Dollars)

 

Actual 2010 Projected 2011

 

________________________________________

 

Assets

 

Cash $ 5.3 $ 5.6

 

Marketable securities 49.9 51.9

 

Accounts receivable 53.0 56.2

 

Inventories 106.0 112.4

 

Total current assets $ 214.2 $ 226.1

 

Net plant and equipment 375.0 397.5

 

Total assets $ 589.2 $ 623.6

 

Liabilities and Equity

 

Accounts payable $ 9.6 $ 11.2

 

Notes payable 69.9 74.1

 

Accruals 27.5 28.1

 

Total current liabilities $ 107.0 $ 113.4

 

Long-term bonds 140.8 148.2

 

Preferred stock 35.0 37.1

 

Common stock (par plus PIC) 160.0 160.0

 

Retained earnings 146.4 164.9

 

Common equity $ 306.4 $ 324.9

 

Total liabilities and equity $ 589.2 $ 623.613-10)

 

Corporate Valuation

 

The financial statements of Lioi Steel Fabricators are shown below—both the actual results for

 

2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011.

 

The weighted average cost of capital is 11%.

 

 

a.If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for

 

12/31/2011?

 

 

b.What is the horizon value as of 12/31/2011?

 

 

c.What is the value of operations as of 12/31/2010?

 

 

d.What is the total value of the company as of 12/31/2010?

 

 

e.What is the intrinsic price per share for 12/31/2010?

 

Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share

 

Data

 

Actual 2010 Projected 2011

 

Net sales

 

$ 500.0

 

$ 530.0

 

Costs (except depreciation)

 

360.0

 

381.6

 

Depreciation

 

37.5

 

39.8

 

Total operating costs

 

$ 397.5

 

$ 421.4

 

Earnings before interest and taxes

 

$ 102.5

 

$ 108.6

 

Less interest

 

13.9

 

16.0

 

Earnings before taxes

 

$ 88.6

 

$ 92.6

 

Taxes (40%)

 

35.4

 

37.0

 

Net income before preferred dividends

 

$ 53.2

 

$ 55.6

 

Preferred dividends

 

6.0

 

7.4

 

Net income available for common dividends $ 47.2

 

$ 48.2

 

Common dividends

 

$ 40.8

 

$ 29.7

 

Addition to retained earnings

 

$ 6.4

 

$ 18.5

 

Number of shares

 

10

 

10

 

Dividends per share

 

$ 4.08

 

$ 2.97

 

Balance Sheets for December 31 (Millions of Dollars)

 

Actual

 

2010

 

Projected 2011

 

Assets

 

Cash

 

$ 5.3

 

$ 5.6

 

Marketable securities

 

49.9

 

51.9

 

Accounts receivable

 

53.0

 

56.2

 


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