Finance F515
13-10 Corporate Valuation 551-552
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 12/41/2010?
Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data.)
Actual Projected 2010 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
Additional 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 Projected 2010 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 $ 133.4
Long-term bonds 140.8 148.2
Preferred stock 35.0 37.1
Common
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 12/41/2010?
Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data.)
Actual Projected 2010 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
Additional 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 Projected 2010 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 $ 133.4
Long-term bonds 140.8 148.2
Preferred stock 35.0 37.1
Common