Project
Jonathan Fabricators has prepared their forecasted sales and financing information together and need your help to determine the intrinsic stock price per share. Their financing is as follows:
|
Financing
|
$ Millions
|
Required Rate
|
|
Debt
|
$2,300
|
6.0%
|
|
Preferred Stock
|
$1,380
|
8.4%
|
|
Common Stock
|
$1,800
|
10.3%
|
The projected financials, which were put together in December, 2011 are:
|
Year
|
1
|
2
|
3
|
4
|
|
Projected Sales Increase
|
23%
|
+17%
|
+11%
|
|
2012
|
2013
|
2014
|
2015
|
|
Sales
|
$1,487
|
$1,829
|
$2,140
|
$2,375
|
|
COGS
|
$1,041
|
$1,152
|
$1,213
|
$1,212
|
|
Depreciation
|
$64
|
$66
|
$70
|
$74
|
|
EBIT
|
$382
|
$611
|
$857
|
$1,089
|
|
Interest
|
$13
|
$16
|
$18
|
$17
|
|
EBT
|
$369
|
$595
|
$839
|
$1,072
|
|
Tax @35%
|
$129
|
$208
|
$294
|
$375
|
|
Net Income
|
$240
|
$387
|
$545
|
$697
|
|
|
|
|
|
All numbers are in $M. Free Cash Flow growth is expected to be constant at 3.7% after 2015. Net working capital is expected to grow as shown below, with the dollars in millions:
|
|
2012
|
2013
|
2014
|
2015
|
|
Change in NWC
|
$12
|
$13
|
$15
|
$16
|
Jonathan's also has $2,500 in marketable securities. The company's required rate of return is 12.3%, their tax rate is 35%, and Jonathan has 100 M shares of common stock outstanding.
Jonathan's wants you to determine the following information:
1. What is their Weighted Average Cost of Capital?
2. What is their Horizon value in 2015?
3. What is their Value of Operations as of January 1, 2012?
4. What is the Total Intrinsic Value of the firm?
5. What is the Intrinsic Stock Price per share?
The CFO requires that you show your work, for she wants to double check your calculations.