De La Salle Graduate School - Corporate Financial Structuring - Final Exam - December 5, 2010 - 2nd

De La Salle Graduate School - Corporate Financial Structuring - Final Exam - December 5, 2010 - 2nd

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Last Updated   Term School Year De La Salle University-Professional Schools, Inc. Graduate School of Business Corporate Financial Structuring Final Examination December 5, 2010 1. Medical Corporation has the following financial statement s below for fiscal year ending May 31 for years 2008 and 2009. Figures are in million dollars except per share data. Income Statement 2008 2009 . Revenue $ 474,000,000 $ 598,000,000 Depreciation $ 20,000,000 $ 23,000,000 Other Operating Costs $ 368,000,000 $ 460,000,000 Income before taxes $ 86,000,000 $ 115,000,000 Taxes $ 26,000,000 $ 35,000,000 Net Income $ 60,000,000 $ 80,000,000 Dividends $ 18,000,000 $ 24,000,000 Earnings per Share $ 0.714 $ 0.952 Dividends per Share $ 0.214 $ 0.286 Common Shares outstanding 84.4 million 84.4 million Balance Sheet 2008 2009 . Current Assets (includes $ 5 million cash in 2008 and 2009) $ 201,000,000 $ 326,000,000 Net property, plant, and equipment $ 474,000,000 $ 489,000,000 Total assets
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Unformatted text preview: $ 675,000,000 $ 815,000,000 Current Liabilities (all non-interest bearing) $ 57,000,000 $ 141,000,000 Long Term Debt $ 0 $ 0 . Total Liabilities $ 57,000,000 $ 141,000,000 Shareholders’ equity $ 618,000,000 $ 674,000,000 Total liability & equity $ 675,000,000 $ 815,000,000 Capital Expenditures $ 34,000,000 $ 38,000,000 2-2 1-1 1 Selected Financial Information . Required rate of Return on equity 14% Growth Rate of Industry 13% Industry P/E 26 Use FCFE to value the stock of Medical Corporation. Medical Corporation’s FCFE will grow at 27% for two years and 13% thereafter forever. Capital expenditures, depreciation, and working capital are all expected to increase proportionately with FCFE. a. Compute the amount of FCFE per share for 2009 using the data above. b. Compute the current value of a share of Medical Corp. stock based on the two stage FCFE model....
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