Bakery has sales of $953,000 with COGS of $415,000 and SG&A expenses of $134, 000. Interest expense is $66,000 and depreciation is $58,000. The combined Federal and NJ Income tax rates are 30 percent. a) What is the gross profit for Julia’s? b) What is the operating income ? c) What is the EBT? d) What is the current year tax liability? e) What is the net income? f) If there are two shareholders and each received a dividend of $12,500 what are the retained earnings?
1) Bakery has sales of $953,000 with COGS of $415,000 and SG&A expenses of $134, 000. Interest expense is $66,000 and
a) What is the gross profit for Julia’s?
b) What is the operating income ?
c) What is the EBT?
d) What is the current year tax liability?
e) What is the net income?
f) If there are two shareholders and each received a dividend of $12,500 what are the
2) They are a publicly traded, and the stock pays a constant annual dividend of $1.39 per share.
a) How much are you willing to pay for one share if you require a
b) How would that price change if the required rate of return dropped by 260 basis points?
The company has just announced a change in their payout (dividend) policy. They now report that the
dividend will grow at a rate of 3% per year
c) Recalculate both previous responses using this new information
3) Their most recent fiscal year ended on September 30th and the company is reporting the following results –
•FCF0 = $72 million
•WACC = 12%
•FCF is expected to grow at a constant rate of gL = 4.75%
•Short-term investments = $147 million
•Debt = $245 million
•
•Number of shares =n = 12.5 million
a) Create an excel model that will process these inputs and provide the following outputs. Your model
should be easy to read and should also provide details on the formula used to produce each metric listed–
• Operational Value
• Total Value
• Intrinsic value of Equity
• Intrinsic value per Share
b) Use the following information to update your model - On November 15th the company released the
following information regarding plans to continue to expand the business
•Expansion financed by owners.
•Projected
• Year 1 FCF = −$17 million.
• Year 2 FCF = $31 million.
• Year 3 FCF = $42 million
• FCF grows at constant rate of 8% after year 3.
•No change in WACC, marketable securities, debt, preferred stock, or number of shares of stock.
•SOLVE FOR Horizon Value at end of initial period of non-constant growth HV3 as well as Vop
accounting for PV’s of FCF during non-constant growth and the horizon value
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