Assignment
The following financial statements and additional information belong to ABC Company.
|
ABC's BalanceSheets (Millions of Dollars)
|
|
Assets
|
2020
|
2021
|
|
Cash and equivalents
|
$ 160
|
$ 60
|
|
Accounts receivable
|
400
|
520
|
|
Inventories
|
620
|
820
|
|
Total current assets
|
$ 1.180
|
$ 1.400
|
|
Net fixed assets
|
$ 2.900
|
$ 3.500
|
|
Total assets
|
$ 4.080
|
$ 4.900
|
|
Liabilities and equity
|
|
|
|
Accounts payable
|
$ 350
|
$ 350
|
|
Current portion of long term debt
|
200
|
540
|
|
Total currentliabilities
|
$ 550
|
$ 890
|
|
Long-term bonds
|
800
|
1.100
|
|
Total liabilities
|
$ 1.350
|
$ 1.990
|
|
Common stock
|
1.000
|
1.000
|
|
Retained earnings
|
1.730
|
1.910
|
|
Total equity
|
$ 2.730
|
$ 2.910
|
|
Total liabilities andequity
|
$ 4.080
|
$ 4.900
|
|
ABC's IncomeStatement (Millions of Dollars)
|
|
|
2020
|
2021
|
|
Net sales
|
$ 5.500
|
$ 6.000
|
|
Cost of goods sold (Excluding depr. & amort.)
|
4.000
|
4.500
|
|
Depreciation and amortizationa
|
290
|
320
|
|
Otheroperating expenses
|
350
|
420
|
|
Total operating costs
|
$ 4.640
|
$ 5.240
|
|
Earnings beforeinterest and taxes (EBIT)
|
$ 860
|
$ 760
|
|
Less interest
|
68
|
108
|
|
Pre-tax earnings
|
$ 792
|
$ 652
|
|
Taxes (25%)
|
198
|
163
|
|
Net Income
|
$ 594
|
$ 489
|
|
Tax rate
|
25%
|
25%
|
|
Weighted average cost of capital (WACC)
|
10,00%
|
10,00%
|
|
Sharesoutstanding (millions)
|
100
|
100
|
Task
A. Calculate the 2021 FCFF for ABC Company
B. We assume that the FCFF is expected to grow foreverat 5%, calculate the firm value
C. Calculate the value of Equity knowingthat the marketvalue of debt is 1 million $.
D. What is the value per shareusing FCFF approach?