Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog lookglamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the valuesprovided are from year-end 2019. Also assume that the firm's equity beta is 1.60, the risk-free rate is 2.25 percent, and the market riskpremium is 7.0 percent.Dividends per shareReturn on equityBook value per share$ 2.109.50%$17.502019 value per shareAverage price multipleForecasted growth rateEarnings$ 5.0013.1013.51%Cash FlowSales$25.652.397.21%$ 6.609.4511.38%The required return is 13.45 percent. Use the clean surplus relationship to calculate the share price for Beagle Beauties with theresidual income model. (Do not round Intermediate calculations. Round your answer to 2 decimal places.)Share price

The residual income model refers to the type of valuation metric that helps in evaluating the worth…

Answered: Beagle Beauties engages in the…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 7P: Upton Computers makes bulk purchases of small computers, stocks them in conveniently located...

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You have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwards
You have been tasked with using the FCF model to value Julie’s Jewelry Co. After your initial review, you find that Julie’s has a reported equity beta of 1.6, a debt-to-equity ratio of .5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-free rate of 5 percent and a market risk premium of 9 percent. If Julie’s had FCF last year of $49.0 million and has current debt outstanding of $123 million, find the value of Julie’s equity assuming a 4.8 percent growth rate in FCF. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
In 2022, the ABC Food company has total assets of $46,690,000, cash balance of $3,875,000, sales growth of -3% (-0.03), loss indicator of 1, CFO change indicator of 0. If the manager decides to invest $325,000, does she/he overinvest or underinvest? Based on the threshold of $60,000, do you have to conduct a further investigation and why?
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of .5, and a tax rate of 21 percent. Assume a risk-free rate of 4 percent and a market risk premium of 9 percent. Lauryn’s Doll Co. had EBIT last year of $42 million, which is net of a depreciation expense of $4.2 million. In addition, Lauryn's made $6 million in capital expenditures and increased net working capital by $1.0 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
While conducting a valuation study of Cross Corp for the annual update for the Trustees of the ESOP plan that owns a portion of the firm, you determine that the Terminal Value of the firm, at the end of a four-year Planning Period, is $120,070 (all $s in 000s). The firm’s capital structure is 30% debt and 70% equity, the cost of debt is 4%, and the cost of equity is 12%. The firm has a 24% tax rate. If the Present Value of Planning Period Cash Flows is $72,100, the Enterprise Value for Cross is: a. $72,100 b. $148,407 c. $156,194 d. $192,170 e. None of the above
Quattro Technologies, a hydraulic manufacturer in the aeronautics industry, has reported steadily increasing net income over the past few years. The company reported net income of $120 million in 2019 and $140 million in 2020. The stock is receiving increasing analyst attention because many investors expect the steady growth in net income to continue well into the future.One of the factors increasing sales is the superior warranty Quattro offers. Based on experience, warranty expense in 2021 should be around $40 million. However, in a recent executive meeting it was suggested that the CFO report a larger, more conservative, estimate of warranty expense of $50 million this year.Required:1. Can Quattro use warranty expense to manage its reported amount of net income?2. Assume net income before warranty expense is $210 million in 2021 and $210 million in 2022, and total warranty expense over the two years is $80 million. Calculate net income after warranty expense based on the suggestion…
a. Given the following holding-period returns, (Below)compute the average returns and the standard deviations for the Sugita Corporation and for the market. b. If Sugita's beta is 1.18and the risk-free rate is 4 percent, what would be an expected return for an investor owning Sugita? (Note: Because the preceding returns are based on monthly data, you will need to annualize the returns to make them comparable with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) c. How does Sugita's historical average return compare with the return you should expect based on the Capital Asset Pricing Model and the firm's systematic risk?
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Suppose a potential buyer has offered to buy this company in three years (in 2017). Based on the present value of the company calculated, and being mindful of the need to effectively balance portfolio risk with return, what recommendation should be made about purchasing the company as an investment at that price?
You are reviewing the valuation of Vulcan Enterprises, a private business. The analyst has estimated a value of $ 2.0 million for the company, which is in stable growth and expected to grow 3% a year in perpetuity. The firm has no debt outstanding and is expected to generate an after-tax operating income of $300,000 next year; the return on capital is anticipated to be 15%. The analyst valued the company for a private-to-private transaction, and the cost of equity he estimated is correct, given that setting. (He used a total beta to estimate the cost of equity, a risk-free rate of 4%, and an equity risk premium of 5%).However, the buyer is a publicly-traded firm with diversified investors. The average R-squared across publicly traded companies in this business is 25%. Estimate the correct value of Vulcan Enterprises for sale to a public buyer.
You are thinking of investing in Nikki T's, Inc. You have only the following information on the firm at year-end 2021: net income is $310,000, total debt is $2.50 million, and debt ratio is 55 percent. What is Nikki T's ROE for 2021? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

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