11. If D0 = $1.75, g (which is constant) = 3.6%, and P0 = $32.00, what is the stock’s expected total return for the coming year? Expected Return= D0 X (1+g)/P0 + g = 1.75 X (1+3.6%)/32 + 3.6% = 9.27% 12. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell?
What does the $2.55 billion increase in Berkshire Hathaway’s market value represent? 2. Choice of valuation methods: What do you think PacifiCorp is worth on its own before its acquisition by Berkshire? Which valuation method should you use to value PacifiCorp and why? Show clearly the steps to arrive at the following estimates in Exhibit 10: Enterprise Value as Multiple of: Revenue EBIT EBITDA Net Income 6,252 8,775 9,023 7,596 6,584 9,289 9,076 7,553 MV Equity as Multiple of: EPS Book Value 4,277 5,904 4,308 5,678 Median Mean If you need to use a discount rate to discount cash flows then an appropriate discount rate estimate for PacifiCorp is approximately 9%.
Retrieved from http://www.frbsf.org /education/publications/doctor-econ/2005/october/debt-equity-market Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands) | | | | | | | | | | | September 28, 2013 | | | September 29, 2012 |
Vodafone-Mannesmann Case Questions 1. Vodafone proposes that each Mannesmann share would receive 53.7 Vodafone shares, so that in aggregate Mannesmann shareholders would own 47.2% of the equity of the newly combined firm, 1 and Vodafone shareholders 52.8%. Based on December 17, 1999 stock prices how much would Vodafone shareholders contribute to the newly combined firm? (hint: look at the current market caps of Vodafone’s and Mannesmann’s shares) Assume in what follows that the stock prices prevailing on October 21 reflect the stand-alone values of the firm, so that both firms would trade at October 21 prices if the bid failed and the merger did not go through. a. b.
5. On January 28, 2012, the stock price for Gap was $18.84. Calculate the Price-Earnings multiple for Gap. (Stock Price/EPS). Does this seem high or low?
Husky used annual observations from 20 prior years to estimate each of the four equations. Following are a definition of the variables used in the four equations and a statistical summary of these equations: St = Forecasted sales in dollars for Lockit in period t St–1 = Actual sales in dollars for Lockit in period t – 1 Gt = Forecasted U.S. gross domestic product in period t Gt–1 = Actual U.S. gross domestic product in period t – 1 Nt–1 = Lockit’s net income in period t – 1 Required: 1. Write Equations 2 and 4 in the form Y = a + bx. 2. If actual sales are $1,500,000 in 2009, what would be the forecasted sales for Lockit in 2010?
A. $16,500 B. $9,000 C. $25,500 D. $7,500 E. $50,000 Difficulty: Easy 2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2008, Dew reported income of $250,000 and paid dividends of $80,000.
Executive Summary In 2009, Pharmaceutical giant Pfizer, Inc. acquired Wyeth - a competitor within the industry - for $68B. This report offers a valuation of Wyeth at the time of purchase using two methods: the discounted free cash flow method and the comparable company method. The discounted free cash flow method yields a valuation of $84.73B while the comparable company method yields a valuation range of $57.56B to $73.39B. Part 1: Discounted Free Cash Flow to the Firm Valuation Methodology Discounted Free Cash Flow to Firm (DFCFF) analysis computes the fair value of the firm by taking the following steps: * Forecasting the income statement and balance sheet figures (see Appendices I and II for assumptions) * Preparing the Cash Flow Statement (see Appendix III) and computing Free Cash Flows to Firm (see Appendix V) for the forecasted years. * Determining the WACC and discounting the Free Cash Flow to Firm to obtain the Fair Value of Firm as on 1st July, 2009.
– 133 2013 net sales / base year 2011 net sales = 800,000 / 600,000 = 1.33 1.33 x 100% = 133% 5. In analyzing financial statements, horizontal analysis is a- tool 6. Comparative balance sheets - are usually prepared for at least two years 7. Assume the following cost of goods sold data for a company: 2013 $1,500,000 2012 1,200,000 2011 1,000,000 If 2011 is the base year, what is the percentage increase in cost of goods sold from 2011 to 2013? – 50% = New - Old Old 100 8.
(6 marks) 1 City University London Intermediate Macroeconomics 1 Joe Pearlman c) Sketch the Laffer curve for values of t from 0 to 1. (4 marks) d) If G=1/6, find the two values of l and t that satisfy this requirement. (4 marks) Question 3: (a) Download the US index of industrial production (IIP) on a monthly basis from http://research.stlouisfed.org/fred2/series/INDPRO/downloaddata?cid=3 and US M2 from http://research.stlouisfed.org/fred2/series/M2/downloaddata?cid=29 (b) Calculate the % year-to-year growth rates in each series, and graph them using a time series plot and a scatter plot (4 marks) (c) Are they positively