a) Given the financial statements for ABC Inc. in the dataset 2, please answer t
ID: 2741492 • Letter: A
Question
a) Given the financial statements for ABC Inc. in the dataset 2, please answer the following question.
Based on the income statement for ABC Inc., what is the amount of EBITDA for 2010, 2012, and 2014?
b) Based on the given financial statements for ABC Inc., what are the values of current and quick ratios for 2014?
c) Based on the given financial statements for ABC Inc., what are the values of Inventory Turnover for 2012 and 2013?
d) Based on the given financial statements for ABC Inc., what are the values of long-term debt to total equity ratio for 2014 and 2015?
e) Based on the given financial statements for ABC Inc., what are the value of Market Value to Book Value Ratio for 2014 and 2015?
f) Based on the given financial statements for ABC Inc., what is the value of Price-Earnings Ratio for 2014 and 2015?
g) What is ABC Inc.’s enterprise value if its WACC is expected to be 7.46136%, its free cash flows to all debt and equity holders is expected to be $ 1,225.2, $ 914.6, $ 1,355.9, $ 1,371.9 and $ 1,668.3 for the next five years and beyond which it is expected to grow by 3.75% per year into perpetuity?
h) What is ABC Inc.’s per share stock price in 2015 assuming that its market value of debt in 2015 is expected to be $550?
Analyst Name: Your Name Company Name: ABC Inc. Year (Most recent in far right column.) 2010 2011 2012 2013 2014 2015 BALANCE SHEET DATA Assets: Cash and cash equivalents 281 270 600 1,164 1,148 1,189 Marketable securities 157 53 66 286 903 848 Accounts and notes receivable - net 288 330 271 303 387 486 Inventories 692 693 665 543 966 1,242 Prepaid expenses and other current assets 149 169 147 157 162 197 Deferred tax assets - current 130 234 287 304 230 239 Other current assets (1) Other current assets (2) Current Assets 1,697 1,748 2,036 2,756 3,795 4,200 Investments in noncontrolled affiliates 259 303 352 342 372 460 Property, plant, and equipment - at cost 5,307 5,717 5,701 5,889 6,163 6,903 <Accumulated depreciation> -2,416 -2,761 -3,165 -3,472 -3,808 -4,244 Amortizable intangible assets (net) 262 328 322 417 410 386 Goodwill 216 267 259 262 322 399 Other nonamortizable intangible assets 0 0 0 0 0 0 Deferred tax assets - non current 0 0 0 0 0 0 Long-term investments 21 71 71 192 107 116 Total Assets 5,344 5,673 5,577 6,386 7,360 8,219 Liabilities and Equities: Accounts payable 391 325 267 283 540 398 Current accrued expenses 620 630 771 936 941 1,134 Notes payable and short-term debt 710 713 0 0 0 0 Current maturities of long-term debt 1 1 0 0 0 0 Deferred tax liabilities - current Income taxes payable Deferred Revenue 297 368 389 414 449 510 Insurance Reserves 137 153 154 146 146 168 Current Liabilities 2,156 2,190 1,581 1,779 2,076 2,210 Long-term debt obligations 550 550 549 549 550 550 Long-term accrued liabilities 354 442 390 375 348 345 Deferred tax liabilities- noncurrent Other noncurrent liabilities (1) Other noncurrent liabilities (2) Total Liabilities 3,060 3,182 2,520 2,704 2,973 3,105 Preferred stock Common stock + Additional paid in capital 40 40 187 146 41 40 Retained earnings <deficit> 2,189 2,402 2,793 3,471 4,297 5,046 Accum. other comprehensive income <loss> 55 48 65 57 46 23 <Treasury stock> and other equity adjustments Total Common Shareholders' Equity 2,284 2,491 3,046 3,675 4,385 5,109 Noncontrolling interests 0 0 11 8 2 6 Total Equity 2,284 2,491 3,057 3,682 4,387 5,115 Total Liabilities and Equities 5,344 5,673 5,577 6,386 7,360 8,219 INCOME STATEMENT DATA 2010 2011 2012 2013 2014 2015 Revenues 9,412 10,383 9,775 10,707 11,700 13,300 <Cost of goods sold and occupancy expense> -3,999 -4,645 -4,325 -4,459 -4,916 -5,813 Gross Profit 5,412 5,738 5,450 6,249 6,785 7,486 <Store Operating Expenses> -3,216 -3,745 -3,425 -3,551 -3,595 -3,918 <Other Operating Expenses> -294 -330 -264 -293 -393 -430 <Depreciation and Amortization> -485 -556 -545 -522 -529 -565 <General and Administrative Expenses> -489 -456 -453 -570 -749 -801 <Restructuring Charges> 0 -267 -332 -53 0 0 Other operating income (1) Income from Equity Investees 108 114 122 148 174 211 Non-recurring operating gains <losses> 30 Operating Profit 1,036 498 552 1,407 1,723 1,982 Interest income 41 15 47 55 120 104 <Interest expense> -38 -59 -45 -37 -43 -37 Income <Loss> from equity affiliates Other income or gains <Other expenses or losses> Income before Tax 1,038 454 554 1,425 1,800 2,049 <Income tax expense> -394 -149 -174 -500 -593 -694 Income <Loss> from discontinued operations Extraordinary gains <losses> Changes in accounting principles Net Income 645 305 380 926 1,206 1,355 Net income attributable to noncontrolling interests 0 0 -1 -3 -2 -1 Net Income attributable to common shareholders 645 305 380 923 1,204 1,354 Net Income (enter reported amount as a check) 673 316 391 946 1,246 1,384 Other comprehensive income items 17 -6 17 -8 -11 -24 Comprehensive Income 662 298 397 917 1,196 1,331 STATEMENT OF CASH FLOWS DATA 2010 2011 2012 2013 2014 2015 Net Income 645 305 380 926 1,206 1,355 Add back depreciation and amortization expenses 491 605 563 541 550 581 Add back stock-based compensation expense 11 60 67 77 145 154 Deferred income taxes -37 -117 -70 -42 106 61 <Income from equity affiliates, net of dividends> 0 -9 -25 -17 -33 -49 <Increase> Decrease in accounts receivable 59 -33 -89 -90 <Increase> Decrease in inventories -49 -1 29 123 -422 -273 <Increase> Decrease in prepaid expenses <Increase> Decrease in other current assets <Increase> Decrease in other noncurrent assets Increase <Decrease> in accounts payable 36 -64 -53 -4 228 -136 Increase <Decrease> in income taxes payable Increase <Decrease> in other current liabilities 86 7 59 1 -82 24 Increase <Decrease> in deferred revenues 63 72 16 24 36 61 Other addbacks to <subtractions from> net income 34 329 230 52 -52 24 Other operating cash flows 22 60 122 35 -23 -20 Net CF from Operating Activities 1,303 1,248 1,378 1,682 1,571 1,690 Proceeds from sales of property, plant, and equipment <Property, plant, and equipment acquired> -1,080 -985 -403 -441 -415 -851 <Increase> Decrease in marketable securities -12 24 -13 -338 -536 48 Investments sold <Investments acquired> -53 -74 - -12 -56 -129 Payments for acquisitions of intangible assets Other investment transactions -57 -52 -5 1 -13 -42 Net CF from Investing Activities -1,202 -1,087 -421 -790 -1,020 -974 Increase in short-term borrowing 710 299 31 <Decrease in short-term borrowing> -700 -297 -713 Increase in long-term borrowing 548 -1 -1 -7 -4 <Decrease in long-term borrowing> Issue of capital stock 177 112 57 128 235 237 Proceeds from stock option exercises 93 15 16 37 104 170 <Share repurchases - treasury stock> -997 -311 0 -286 -556 -549 <Dividend payments> -171 -390 -513 Other financing transactions (1) -4 -2 -2 -48 -28 -59 Other financing transactions (2) Net CF from Financing Activities -172 -185 -642 -346 -608 -715 Effects of exchange rate changes on cash 11 1 4 -5 -1 10 Net Change in Cash -59 -22 319 542 -58 11 Cash and cash equivalents, beginning of year 313 281 270 600 1,164 1,148 Cash and cash equivalents, end of year 281 270 600 1,164 1,148 1,189 SUPPLEMENTAL DATA 2010 2011 2012 2013 2014 2015 Statutory tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% Average tax rate implied from income statement data 37.9% 32.8% 31.4% 35.1% 33.0% 33.9% After-tax effects of nonrecurring and unusual items on net income 0 -267 -332 -53 30 0 Depreciation expense 491 605 563 541 550 581 Preferred stock dividends (total, if any) Common shares outstanding 738 736 743 740 745 749 Earnings per share (basic) 0.90 0.43 0.53 1.27 1.66 1.83 Common dividends per share 0.00 0.00 0.00 0.23 0.52 0.68 Share price at fiscal year end 30.32 18.17 24.62 28.69 47.20 62.15 FINANCIAL DATA CHECKS Assets - Liabilities - Equities 0 0 0 0 0 0 Net Income (computed) - Net Income (reported) -28 -11 -11 -23 -42 -30 Cash Changes -11 -11 -23 -42 -30Explanation / Answer
a)Amount of EBITDA for 2010, 2012, and 2014 INCOME STATEMENT DATA 2010 2011 2012 2013 2014 2015 Revenues 9,412 10,383 9,775 10,707 11,700 13,300 Cost of goods sold and occupancy expense -3,999 -4,645 -4,325 -4,459 -4,916 -5,813 Gross Profit 5,413 5,738 5,450 6,248 6,784 7,487 Store Operating Expenses -3,216 -3,745 -3,425 -3,551 -3,595 -3,918 Other Operating Expenses -294 -330 -264 -293 -393 -430 General and Administrative Expenses -489 -456 -453 -570 -749 -801 Restructuring Charges 0 -267 -332 -53 0 0 Other operating income Income from Equity Investees 108 114 122 148 174 211 Non-recurring operating gains (losses) 30 EBITDA 1,522 1,054 1,098 1,929 2,251 2,549 b)Values of current and quick ratios for 2014 2014 Current Assets Cash and cash equivalents 1,148 Marketable securities 903 Accounts and notes receivable - net 387 Inventories 966 Prepaid expenses and other current assets 162 Deferred tax assets - current 230 Total Current Assets 3,796 Current Liabilities Accounts payable 540 Current accrued expenses 941 Deferred Revenue 449 Insurance Reserves 146 Total Current Liabilities 2,076 Current ratio= Current Assets/Current Liabilities =3796/2076 = 1.829 Quick Ratio=( Current assets-inventory-Prepaid& Deferred expenses)/Current Liabilities (3796-966-162-230)/2076= 1.174 c.Values of Inventory Turnover for 2012 and 2013 Inventory Turnover= Cost of Goods Sold/Av.Inventory Where, Av.Inventory=(Opening+Closing Inventory)/2 2012 2,013 COGS 4,325 4,459 Op.Inv. 693 665 Cl.Inv 665 543 Inventory Turnover Ratio= 4325/((693+665)/2) 4459/((665+543)/2) 6.37 7.38 d.Values of long-term debt to total equity ratio for 2014 and 2015 2014 2015 Long-term debt obligations 550 550 Long-term accrued liabilities 348 345 Total long-term debt 898 895 Total Equity 4,387 5,115 Long-term debt to total equity ratio 898/4387 895/5115 0.205 0.175 f) Value of Price-Earnings Ratio for 2014 and 2015 2014 2015 Market price/Share 47.2 62.15 Earnings/Sahre 1.66 1.83 Price-Earnings Ratio 47.2/1.66 62.15/1.83 28.43 33.96 e.Value of MarketValue to Book Value Ratio for 2014 and 2015 2014 2015 Market Value/Share 47.2 62.15 Book Value/share : Total Book Value of Equity 4,387 5,115 Common shares O/s 745 749 Book Value/share 4387/745 5115/749 5.8886 6.8291 Market Value to Book Value Ratio 47.2/5.8886 62.15/6.8291 8.015 9.101 g) FCF PV F @ 7.46136% PV @ 7.46136% Year 1 1225.2 0.930567 1140.131 Year 2 914.6 0.865955 792.0025 Year 3 1355.9 0.805829 1092.624 Year 4 1371.9 0.749878 1028.758 Year 5 1668.3 0.697812 1164.16 Horizon FCF 46636.8 0.697812 32543.71 Total Enterprise Value = 37761.39 Horizon FCF discounted @ Year 5 rates Next Year's FCF/(WACC-Growth Rate) (1668.3*1.0375)/(7.46136%-3.75%)= 46636.8 h) Total Enterprise Value = 37761.4 Value of Debt 550 Value to Equity 37211.4 Common shares O/s in 2015 749 ABC Inc.’s per share stock price in 2015 37211.4/749 49.68
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