Strategic financial planning homework 4

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timer Asked: Feb 25th, 2019
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please see attachment and only bid if you know how to complete it with accuracy and in time ( already late other tutor didn't complete) NEED TO HAVE EXPERIENCE IN FINANCE OR ACCOUNTING

Solution Chapter: Problem: 14 13 J. Clark Inc. (JCI), a manufacturer and distributer of sports equipment, has grown until it has become a stable, mature c Now JCI is planning its first distribution to shareholders. Shown below are the most recent year's financial statements projections for the next year, 2014 (JCI has a fiscal year ending on June 30). JCI plans to liquidate $500 million of its sh securities and distribute them on July 1, 2014, the first day of the next fiscal year, but has not yet decided whether to di with dividends or with stock repurchases. Inputs Amount of distribution Tax rate WACC Number of shares FCF constant growth rate Income Statement (Millions of Dollars) Net Sales Costs (except depreciation) Depreciation Earning before int. & tax Interest expense Earnings before taxes Taxes Net income $500 40% 11,0% 1.000 6,0% Actual 6/30/2013 $20.000,00 $16.000,00 $1.300,00 Projected 6/30/2014 $21.200,00 $16.960,00 $1.378,00 $2.700,00 $150,00 $2.550,00 $1.020,00 $2.862,00 $152,82 $2.709,18 $1.083,67 $1.530,00 $1.625,51 a. Assume first that JCI distributes the $500 million as dividends. Fill in the missing values in the balance sheet column for July 1, 2014, that is labeled "Distribute as Dividends." (Hint: Be sure that the balance sheets balance after you fill in the missing items. Also, assume JCI did not have to establish an account for dividends payable prior to the distribution.) See below for calculations. b. Now assume that JCI distributes the $500 million through stock repurchases. Fill in the missing values in the balance sheet column for July 1, 2014, that is labeled "Distribute as Repurchase." (Hint: Be sure that the balance sheets balance after you fill in the missing items.) Balance Sheets (Millions of Dollars) Assets Cash Short-term investments Accounts receivable Inventories Total current assets Net plant and equipment Actual 6/30/2013 $160,00 $200,00 $2.000,00 $3.000,00 $5.360,00 $13.000,00 Projected: Prior to Distribution 6/30/2014 $169,60 $640,00 $2.120,00 $3.180,00 $6.109,60 $13.780,00 Distribute as Dividend 7/1/2014 $169,60 $2.120,00 $3.180,00 $5.469,60 $13.780,00 Total assets Liabilities & Equity Accounts payable Accruals Short-term debt Total current liabilities Long-term debt Total liabilities Common stock Treasury stock Retained earnings Total common equity Total liabilities & equity $18.360,00 $19.889,60 $19.249,60 $1.000,00 $2.000,00 $400,00 $1.060,00 $2.120,00 $0,00 $1.060,00 $2.120,00 $0,00 $3.400,00 $2.068,18 $5.468,18 $5.851,82 ($400,00) $7.440,00 $12.891,82 $18.360,00 $3.180,00 $2.192,27 $5.372,27 $5.851,82 ($400,00) $9.065,51 $14.517,33 $19.889,60 $3.180,00 $2.192,27 $5.372,27 $5.851,82 Check for balance: $5.851,82 $11.224,09 NOT BALANCED! c. Caculate JCI's projected free cash flow; the tax rate is 40%. Projected Calculation of Free Cash Flow Operating current assets Operating current liabilities 6/30/2013 $5.160,00 3.000,00 Net operating working capital Net plant & equipment $2.160,00 13.000,00 Total net operating capital Net operating profit after taxes Inv. in operating capital $15.160,00 $1.620,00 6/30/2014 Free cash flow (FCF) c. Caculate JCI's horizon value for 6/30/2014. FCF is expected to grow at a constant rate of 6% and JCI's WACC is 11%. Calculate JCI's value of operations for 6/30/2013 and 6/30/2014. (Hint: JCI's value of operations on 6/30/2014 is equal to the horizon value.) Valuation Horizon value Value of operations 6/30/2013 6/30/2014 d. What is JCI's current intrinsic stock price (the price on 6/30/2013)? What is the projected intrinsic stock price for 6/30/2014? See below for calculations. e. What is the projected intrinsic stock price on 7/1/2014 if JCI distributes the cash as dividends? See below for calculations. f. What is the projected intrinsic stock price on 7/1/2014 if JCI distributes the cash athrough stock repurchases? How many shares will remain outstanding after the repurchase? f. What is the projected intrinsic stock price on 7/1/2014 if JCI distributes the cash athrough stock repurchases? How many shares will remain outstanding after the repurchase? See below for calculations. 6/30/2013 Value of operations + Value of nonoperating assets Total intrinsic value of firm − Debt Intrinsic value of equity ÷ Number of shares Intrinsic price per share 6/30/2014 Distribute as Dividend 7/1/2014 12/8/2012 s become a stable, mature company. year's financial statements and quidate $500 million of its short-term ot yet decided whether to distribute in the balance sheet ance sheets balance after dends payable prior to the missing values in the sure that the balance Distribute as Repurchase 7/2/2014 $169,60 $2.120,00 $3.180,00 $5.469,60 $13.780,00 $19.249,60 $1.060,00 $2.120,00 $0,00 $3.180,00 $2.192,27 $5.372,27 $5.851,82 $5.851,82 $11.224,09 NOT BALANCED! 6% and JCI's WACC is erations on 6/30/2014 is d intrinsic stock price for dends? h stock repurchases? h stock repurchases? Distribute as Repurchase 7/1/2014

Tutor Answer

TutorLarra
School: Carnegie Mellon University

Attached.

Solution
Chapter: 14
Problem: 13

J. Clark Inc. (JCI), a manufacturer and distributer of sports equipment, has grown until it has become a stable
first distribution to shareholders. Shown below are the most recent year's financial statements and projections
ending on June 30). JCI plans to liquidate $500 million of its short-term securities and distribute them on July
but has not yet decided whether to distribute with dividends or with stock repurchases.
Inputs
Amount of distribution
Tax rate
WACC
Number of shares
FCF constant growth rate

Income Statement (Millions of Dollars)
Net Sales
Costs (except depreciation)
Depreciation
Earning before int. & tax
Interest expense
Earnings before taxes
Taxes
Net income

$500
40%
11.0%
1,000
6.0%
Actual
6/30/2013
$20,000.00
$16,000.00
$1,300.00

Projected
6/30/2014
$21,200.00
$16,960.00
$1,378.00

$2,700.00
$150.00
$2,550.00
$1,020.00
$1,530.00

$2,862.00
$152.82
$2,709.18
$1,083.67
$1,625.51

a. Assume first that JCI distributes the $500 million as dividends. Fill in the missing values in the balance shee
labeled "Distribute as Dividends." (Hint: Be sure that the balance sheets balance after you fill in the missing ite
have to establish an account for dividends payable prior to the d...

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Anonymous
Top quality work from this guy! I'll be back!

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