Johnson Case

In order to assess Calaveras’ value, I calculated the free cash flow from 1994 to 1998. The free cash flow from each year derived from adding Earnings before Interest and Taxes,

First, the projected cash flows range from $21.2 million in 2007 to $29.5 million in 2011 as shown in the data exhibit ‘DCF model.’ To generate these numbers Liedtke’s base case performance projections are used for the projected 2007 – 2011 net revenue numbers and the estimated depreciation and then his projections for Balance sheet accounts were used to determine the current net working capital and capital expenditure as in the exhibit ‘Financial statements.’ These projections were based by Liedtke under the following assumptions, women’s casual footwear would be wound down within one year and the historical corporate overhead-revenue ratio would conform to historical averages. These annual cash flows give us a PV (Cash flows) of $96.15 million over the next 5 years.

h) How do free cash flows and weighted average cost of capital interact to determine a firm’s value?

The purpose of this report is to evaluate the stock price of Wal-Mart Stores Inc. (which ticker symbol in NYSE is WMT) by fundamental analysis. According to this analysis, I recommend that Wal-Mart is worth to invest in the long term because of the potential growth of market shares and revenue. Besides, based on P/E method and Gordon model, WMT price is undervalued; therefore, if investors buy the stock, they will get benefit not only in capital gain but also in dividend cash inflow.

A. The company needs to focus on the free cash flows instead of the accounting profits since these are the funds flow the company will receive and will be able to reinvest. By examining the cash flows they will be adapt to predict the profits and/or expenses timetable. The company’s interests in these cash flows are on an after-tax basis since they are part of the shareholders dividends. Additionally, the additional cash flows are of important, because, after analyzing the project while viewing the company as a whole, the additional cash flows are seen as minimal benefits and will show the elevated value to the company if the decision is made to implement the project.

To measure their ability to repay maturing debt, JCPenney looks at their free cash flow. The free cash flow is used to measure excess cash generated by operating activates after the company pays capital expenditures and dividends . It is necessary that the free cash flow is not viewed as a replacement to the statement of cash flows, but analyzed in accordance. The free cash flow is very simple since it does not deduct any payments used for paying debt maturities, pension debt or other payments in acquisitions. Below is the free cash flow for JPenney from the 2012 10K.

The next step was to calculate the free cash flows for the eleven-year period. In order to do so, we used to following formula: FCF = EBIT(1-tax) + depreciation - change in NWC – CapEx. From here, we used to WACC of 13.89% previously calculated, in order to find the present value of each FCF.

* Determine the investment’s value without leverage, VU, by discounting its free cash flows at the

Using the data provided in Exhibit 1, we can get free cash flow of year 2007-2011 would be $21.24 million, $26.73 million, $22.10 million, $25.47 million, and $29.54 million respectively. The computation is showed in Exhibit 1($ in thousands).

High Gross Margin: Since the company produces unique drugs, it can price them high in the market as long as no competitor produces a similar drug. Hence a pharmaceutical company can command a substantial gross margin like the one showed here.

Johnson & Johnson is a valuable company to invest in. Its great increase in stock prices this year shows that other investors believe so as well. With a 52 week range from 68.6 to 96 showing and increase of 27.4, an approximate percent change of 40%, it shows that there is great hope in this company. Also back to back positive quarterly sales make the company more appealing. The third quarterly sales showed an overall increase of 3.1% compared to last year’s third quarter sales, beating projected expectations for the company.

Free cash flow is determined by adding up all the company’s incoming cash and then subtract the cash that the company is obliged to payout, which includes all expenses, debt service, preferred dividend and capital expenditures related to the fiscal period.

Regarding Johnson & Johnson’s earnings per share, we can see that from the total net earnings, each share of the company’s common stock is valued in $4.40 which has significantly decreased from its value in 2008, but once again is over the value of year 2007, probably due to the economic crisis.

So, the higher the dividend yields, the better income the shareholders get. When companies pay high dividends to shareholders, it can indicate a variety of things about the company, as the company may be currently undervalued or that it is trying to attract investors. Conversely, if companies pay little or no dividends, it may indicate that the company is overvalued or that the company is trying to develop the capital. The dividend yield of Maxis Berhad’s is only 3.2%, while Axiata Group Berhad has higher dividend yield compared to Maxis Berhad, which is 3.7%. A higher dividend yield may be desirable from an investor’s perspective. But, a higher dividend yield also means that the stock is under

Q2: Use the FCF Valuation Template below to modify the analysis in the case, Ex. 6 (incorrectly labeled Ex. 5), calculating and defending an estimate of Crocs value. Soln: The preferred method to determine a company’s going-concern value by adjusting for risk and time. Simply put, the value of equity = value of firm – value of debt. So to find the intrinsic or fair values of Crocs, the forecast numbers from exhibit 6 were plugged into the provided template and appropriate entries from the balance sheet and income statement were entered. Assumptions: The depreciation and amortization amounts, capital expenditures were pulled directly from exhibit 6 assuming them to be incremental. Other assumptions include the discount rate at 10.96%, the long-term growth at 6%, and market value of debt as zero and no redundant assets. The firm will have perpetual growth after 4 years at a rate of 6%. The free cash flows along with terminal value calculated are listed below: