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Corporate Valuation - Managerial Accounting F5150

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PROJECT 13-10 F5150N Managerial Accounting

Corporate Valuation

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 12/31/2010?

Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data)

Actual 2010 Projected 2011 Net sales 500.00 530.00 after 2011 Costs (except depreciation) 360.00 381.60 FCF g rate 6% Depreciation 37.5 39.8 WACC 11% Total operating costs 397.50 421.40 EBIT 102.50 108.60 Less interest 13.90 16.00 Earnings before taxes 88.60 92.60 Taxes (40%) 35.40 37.00 Net income before preferred dividends 53.20 55.60 Preferred dividends 6 7.4 N I available for common dividends 47.20 48.20 Common dividends 40.80 29.70 Addition 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 2010 Projected 2011 ASSETS Cash 5.30 5.60 Marketable Securities 49.90 51.90 Accts Recievables 53.00 56.20 Inventories 106.00 112.40 Total Current Assets 214.20 226.10 Net Plant & Equip 375.00 397.50 TOTAL Assets 589.20 623.60 LIABILITIES & EQUITY Accts Payable 9.60 11.20 Notes Payable 69.90 74.10 Accruals 27.50 28.10 Total Current Liabilities 107.00 113.40 Long…...

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