Question

Actual Forecasts Year 2019 Year +1 Year +2 Year +3 Revenues 37,137.0 40,426 44,006 47,904 <Cost...

Actual Forecasts
Year 2019 Year +1 Year +2 Year +3
Revenues 37,137.0 40,426 44,006 47,904
<Cost of Goods Sold> -14,762.0 -18,931 -20,607 -22,432
<Selling, General and Administrative Expenses> -11,711.0 -13,169 -14,336 -15,605
<Interest Expense> -239.0 -200 -245 -10
Income before Tax 10,425.0 8,126 8,818 9,856
<Income Tax> -2,794.0 -2,399 -2,603 -2,910
Net Income 7,631.0 5,727 6,215 6,947
ASSETS:
Cash and Cash Equivalents 1,651 1,804 1,964 2,138
Marketable Securities 1,171 1,127 1,227 1,336
Accounts Receivable - Net 3,725 5,295 4,524 6,165
Inventories 1,926 1,793 2,255 2,152
Current Assets 8,473 10,020 9,970 11,790
Property, Plant & Equipment - at cost 19,058 21,151 23,744 26,837
<Accumulated Depreciation> -9,871 -11,479 -13,088 -14,696
Other Non-Current Assets (1) 980 1,010 1,041 1,073
   Total Assets 18,640 20,701 21,668 25,004
LIABILITIES:
Accounts Payable - Trade 2,000 3,243 2,634 3,594
Notes Payable and Short Term Debt 274 316 331 382
Current Liabilities 2,274 3,559 2,964 3,976
Long Term Debt 2,550 4,004 4,117 4,751
Long Term Accrued Liabilities 4,624 5,034 5,479 5,965
Total Liabilities 9,448 12,597 12,561 14,691
Common Stock + Paid in Capital 614 248.4 260 300
Retained Earnings 16,336 17114 19605 22271
<Treasury Stock> -7,758 -9,258 -10,758 -12,258
Common Shareholders' Equity 9,192 8,105 9,107 10,313
Total Liabilities and Equities 18,640 20,701 21,668 25,004

Note: Common Dividends are 40% of NI

# of shares 1581.0
Growth Rate 3.05%
Levered Market Beta 0.76
Risk Free Rate 4.07%
Market Risk Premium 6.11%


A- what are the Dividends for Year +1

B- what are the Dividends for Year +2

C- what are the Dividends for Year +3

D- what is the Required Income for Year +1

E- what is the Required Income for Year +2

F- what is the Required Income for Year +3

G- what are the Dividends for Year t+1

H- what is the continuing DIV

I- What is the value of the stock according to the Financial Statement forecast

J- Currently, the D/E ratio is 0.5. What will be the new levered market beta of the firm if the D/E ratio changes to 1.2?

Homework Answers

Answer #1

Sorry, but we are only required to answer first 4 parts of the question.

The rest of the question will be solved in same tone.

For the last part (j) you first have to deleverage the beta and then again releverage the beta to get the answer.

Hope it helps.

All the best?

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