Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 13, Problem 18PC
a
To determine
Calculate the value of Steak ’n Shake as on January 1, year +1 using residual income model.
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The following are forecasted residual operating income (ROPI) for Reed Corporation for Year 7:
Current
Forecast Horizon
Terminal Year
($millions)
Year 7
Year 8
Year 9
Year 10
Year 11
Residual operating income (ROPI)
$1,999
$2,099
$2,204
$2,314
$2,430
$2,479
Assume a discount rate of 6%, an expected terminal growth rate of 2%, Year 7 NOA of $29,896, and Year 7 NNO of $17,314.
What is the firm’s equity value using the ROPI valuation model?
The following are forecasted residual operating income (ROPI) for Reed Corporation for Year 7:
Current
Forecast Horizon
Terminal Year
($millions)
Year 7
Year 8
Year 9
Year 10
Year 11
Residual operating income (ROPI)
$1,999
$2,099
$2,204
$2,314
$2,430
$2,479
Assume a discount rate of 6%, an expected terminal growth rate of 2%, Year 7 NOA of $29,896, and Year 7 NNO of $17,314.
What is the firm’s equity value using the ROPI valuation model?
$79,584
$56,899
$17,314
$72,777
None of these are correct.
1. Given the most recent financial statements for FY2023. Sales for FY2024 are expected to grow by 10 percent. The following assumption must be held in the pro forma financial statements. The tax rate (percentage), the interest expense ($ amount), and the dividend payout ratio (percentage) will remain constant. COGS, SGA, Depreciation, all current asset accounts, Net PPE, intangibles, other assets, and accounts payable increase spontaneously with sales. Calculate the pro forma value for total assets for FY24 if the firm operates at full capacity and no new debt or equity is issued. (Enter percentages as decimals and round to 4 decimals)
2. Given the most recent financial statements for FY2023. Sales for FY2024 are expected to grow by 10 percent. The following assumption must be held in the pro forma financial statements. The tax rate (percentage), the interest expense ($ amount), and the dividend payout ratio (percentage) will remain constant. COGS, SGA, Depreciation, all…
Chapter 13 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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