ACTG 3000 Study Guide - Midterm Guide: Dividend Discount Model, Nopat, Net Profit

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limegoldfish227

12 Nov 2016

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Free cash flows to equity = net profit change in bva + Iv0 = bve0 + ae1/(1+re) + ae2/(1+re)2 + . Ae1 = ni1 (re*bve0) normal earnings/capital charge. Bve1 = bve0 + ni1 div1 g = (1 k)*roe k = payout ratio. Assets=total assets + pv of lease dep"(cid:374) exp. Nopat = ni + nieat = ni + nie(1-t) Nopat margin = nopat/sales ppe t/o = sales/net ppe. Paid g=roe(1 k) k=cash div. paid/ni g= ni/sales*sales/assets*assets/se *(1 k) Chapter 8 terminal values: competitive equilibrium: aet+1 = 0, then vt=0, constant: aet+1 = ae1, then your vt = aet / re, constant growth: aet+1 = (1+g)*aet, then your vt = [(1+g)*aet ] / (re g: constant decay: aet+1 = beta(<1)*aet, then your vt = (beta*aet )/ [re (beta-1)] =pv of bve at the end of forecasting period. Capm for cost of equity; wacc for discount rate. Cost of debt = (net) interest rate on (net) debt.

Related Questions

Use the following financial statements for Lake of Egypt Marina,Inc.

LAKE OFEGYPT MARINA, INC Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars)
	2015		2014			2015		2014
Assets					Liabilities and Equity
Currentassets:					Currentliabilities:
Cash and marketable securities	$	44	$	42	Accrued wages and taxes	$	28	$	30
Accounts receivable		36		36	Accounts payable		32		36
Inventory		153		63	Notes payable		36		42

Total	$	233	$	141	Total	$	96	$	108
Fixedassets:					Long termdebt:		51		90
Gross plant and equipment	$	212	$	186	Stockholdersâ equity:
Less: Depreciation		65		45	Preferred stock (3 millionshares)	$	3	$	3
					Common stock and paid-in surplus (21 million shares)		21		21
Net plant and equipment	$	147	$	141	Retained earnings		229		78
Other long-term assets		20		18

Total	$	167	$	159	Total	$	253	$	102

Totalassets	$	400	$	300	Totalliabilities and equity	$	400	$	300

LAKE OF EGYPT MARINA, INC. Income Statement for Years Ending December 31, 2015 and 2014 (in millions of dollars)
	2015		2014
Net sales (allcredit)	$	500	$	300
Less: Cost of goodssold		180		105

Gross profits	$	320	$	195
Less: Otheroperating expenses		30		15

Earnings beforeinterest, taxes, depreciation, and amortization (EBITDA)		290		180
Less:Depreciation		20		12

Earnings beforeinterest and taxes (EBIT)	$	270	$	168
Less: Interest		20		18

Earnings beforetaxes (EBT)	$	250	$	150
Less: Taxes		75		45

Net income	$	175	$	105

Less: Preferredstock dividends	$	3	$	3

Net income availableto common stockholders	$	172	$	102
Less: Common stockdividends		21		21

Addition to retainedearnings	$	151	$	81
Per (common) sharedata:
Earnings per share (EPS)	$	8.190	$	4.857
Dividends per share (DPS)	$	1.000	$	1.000
Book value per share (BVPS)	$	11.905	$	4.714
Market value (price) per share(MVPS)	$	15.250	$	13.050

Calculate the following ratios for Lake of Egypt Marina, Inc. asof year-end 2015. (Use sales when computing the inventoryturnover and use total equity when computing the equity multiplier.Round your answers to 2 decimal places. Use 365 days ayear.)

LAKE OF EGYPT MARINA, INC.
a.	Current ratio	2.43 times
b.	Quick ratio	0.83 times
c.	Cash ratio	0.46 times
d.	Inventory turnover	3.27 times
e.	Daysâ sales in inventory	111.69 days
f.	Average collection period	days
g.	Average payment period	days
h.	Fixed asset turnover	times
i.	Sales to working capital	times
j.	Total asset turnover	times
k.	Capital intensity	times
l.	Debt ratio	%
m.	Debt-to-equity	times
n.	Equity multiplier	times
o.	Times interest earned	times
p.	Cash coverage	times
q.	Profit margin	%
r.	Gross profit margin	%
s.	Operating profit margin	%
t.	Basic earnings power	%
u.	ROA	%
v.	ROE	%
w.	Dividend payout	%
x.	Market-to-book ratio	times
y.	PE ratio	times

orangerabbit89

my company is target. Target competitor are Walmart, Amazon,Costco.

e.) How does your company stack up against its competiton.(graph/charts) (1-2 pages)

(1). Is company attractive in an attractive industry

(2.) what metrics superior companies for industry.

3.) analyze your company ranks in the industry using dupontanalysis and industry specififc ratios.

f.) state your investment thesis your investment philosophy

Does your company pass the your 10 minute test(graph/charts)

A.) Sustainable economic moat ? (your test) profitability? yourcompany ( Pass / Fail) Explain

B.) Growth? Stable? Dividends? (your test) your company (Pass /Fail) Explain

C.) Financial Health? Financial Risk your test your company(pass/ fail) explain

D.) Quality of Income? your test your company (pass/fail)explain

e.) good value? Buy now? your test your company (pass/fail)explain

This stock appears to be trading (below / about / over itaverage price.

g.) investment decisions

overall, this company is long term ( buy/ review again at lowerprice / bust?

Why? Give 5 good reason

$ in Millions	1/30/2011	1/29/2012	2/3/2013	2/2/2014	2/1/2015
PROFITABILITY Ratios	Are we generating enough returns on revenuesand investments?
Gross Profit Margin	31%	31%	30%	29%	30%
Net ProfitMargin, also known as Return on Sales (ROS)	4%	4%	3%	-2%	5%
Return on Assets (ROA)	7%	6%	4%	-4%	8%
Earnings per Share (EPS)	$4.31	$4.57	$3.10	-$2.58	$5.25
Quality of Earnings ratio	-1.86	-1.78	-3.31	-2.71	1.74

Investment Ratios

INVESTMENT Ratios	How do weappear to our shareholders?
Dividends per share	$ (1.10)	$ (1.32)	$ (1.58)	$ (1.90)	$ (2.13)
Market Value per share	$ 59.00	$ 56.00	$ 54.00	$ 53.00	$ 53.00
Dividend Yield	-1.87%	-2.37%	-2.93%	-3.59%	-4.01%
Price-to-Earnings (P/E) ratio	-53.49	-42.27	-34.14	-27.84	-24.91
Price-to-Sales (P/S) ratio	38.09	37.00	35.44	33.69	34.98
Price-to-Book (P/B) ratio	22.00	23.64	25.13	25.56	25.57

DuPont Analysis of ROE = ROS xAsset turnover = ROA x Financial LEVerage = ROE
Return on Sales(ROS), also known as Net Profit Margin	4.19%	4.09%	2.77%	-2.25%	4.56%
Asset Turnover	1.60	1.57	1.48	1.63	1.79
Return on Assets (ROA)	6.70%	6.43%	4.09%	-3.67%	8.17%
Financial LEVerage	2.82	2.95	2.91	2.74	2.94
Return on Equity (ROE)	18.91%	18.96%	11.90%	-10.08%	24.03%