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13-10) Corporate Valuation The financial statements of Lioi Steel Fabricators are shown belowboth the actual results for 2010 and the projections for...

13-10)
Corporate Valuation
The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011. The weighted average cost of capital is 11%.
• a.If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for 12/31/2011?
• b.What is the horizon value as of 12/31/2011?
• c.What is the value of operations as of 12/31/2010?
• d.What is the total value of the company as of 12/31/2010?
• e.What is the intrinsic price per share for 12/31/2010?
Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data
Actual 2010 Projected 2011
________________________________________
Net sales $ 500.0 $ 530.0
Costs (except depreciation) 360.0 381.6
Depreciation 37.5 39.8
Total operating costs $ 397.5 $ 421.4
Earnings before interest and taxes $ 102.5 $ 108.6
Less interest 13.9 16.0
Earnings before taxes $ 88.6 $ 92.6
Taxes (40%) 35.4 37.0
Net income before preferred dividends $ 53.2 $ 55.6
Preferred dividends 6.0 7.4
Net income available for common dividends $ 47.2 $ 48.2
Common dividends $ 40.8 $ 29.7
Addition to retained earnings $ 6.4 $ 18.5
Number of shares 10 10
Dividends per share $ 4.08 $ 2.97
Balance Sheets for December 31 (Millions of Dollars)
Actual 2010 Projected 2011
________________________________________
Assets
Cash $ 5.3 $ 5.6
Marketable securities 49.9 51.9
Accounts receivable 53.0 56.2
Inventories 106.0 112.4
Total current assets $ 214.2 $ 226.1
Net plant and equipment 375.0 397.5
Total assets $ 589.2 $ 623.6
Liabilities and Equity
Accounts payable $ 9.6 $ 11.2
Notes payable 69.9 74.1
Accruals 27.5 28.1
Total current liabilities $ 107.0 $ 113.4
Long-term bonds 140.8 148.2
Preferred stock 35.0 37.1
Common stock (par plus PIC) 160.0 160.0
Retained earnings 146.4 164.9
Common equity $ 306.4 $ 324.9
Total liabilities and equity $ 589.2 $ 623.6

13-10) Corporate Valuation The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011. The weighted average cost of capital is 11%. a.If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for 12/31/2011? b.What is the horizon value as of 12/31/2011? c.What is the value of operations as of 12/31/2010? d.What is the total value of the company as of 12/31/2010? e.What is the intrinsic price per share for 12/31/2010? Income Statements for the Year Ending December 31 (Millions of Dollars Except for Per Share Data Actual 2010 Projected 2011 Net sales $ 500.0 $ 530.0 Costs (except depreciation) 360.0 381.6 Depreciation 37.5 39.8 Total operating costs $ 397.5 $ 421.4 Earnings before interest and taxes $ 102.5 $ 108.6 Less interest 13.9 16.0 Earnings before taxes $ 88.6 $ 92.6 Taxes (40%) 35.4 37.0 Net income before preferred dividends $ 53.2 $ 55.6 Preferred dividends 6.0 7.4 Net income available for common dividends $ 47.2 $ 48.2 Common dividends $ 40.8 $ 29.7 Addition to retained earnings $ 6.4 $ 18.5 Number of shares 10 10 Dividends per share $ 4.08 $ 2.97 Balance Sheets for December 31 (Millions of Dollars) Actual 2010 Projected 2011 Assets Cash $ 5.3 $ 5.6 Marketable securities 49.9 51.9 Accounts receivable 53.0 56.2
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Actual 2010 Projected 2011 Inventories 106.0 112.4 Total current assets $ 214.2 $ 226.1 Net plant and equipment 375.0 397.5 Total assets $ 589.2 $ 623.6 Liabilities and Equity Accounts payable $ 9.6 $ 11.2 Notes payable 69.9 74.1 Accruals 27.5 28.1 Total current liabilities $ 107.0 $ 113.4 Long-term bonds 140.8 148.2 Preferred stock 35.0 37.1 Common stock (par plus PIC) 160.0 160.0 Retained earnings 146.4 164.9 Common equity $ 306.4 $ 324.9 Total liabilities and equity $ 589.2 $ 623.6
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Question ==============================================
Corporate Valuation
The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010
and the projections...

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