Consider the financial statements below for Media Motors. The firm's cost of capital is 10%. The firm is stable, and the long-term growth rate for all items is expected to be 4%. Their CEO's name is Ray Charles. Use the information below to estimate the fair market value of MM's equity as of year-end 2013.
|
2013 Income Statement
|
|
Sales
|
500
|
|
Cost of goods sold
|
250
|
|
SG&A expense
|
50
|
|
EBIT
|
200
|
|
Interest expense
|
40
|
|
Taxable income
|
160
|
|
Taxes
|
64
|
|
Net Income
|
96
|
|
2012 Balance Sheet
|
|
|
Cash
|
50
|
|
Accounts payable
|
70
|
|
Accounts receivable
|
100
|
|
Total current liab.
|
70
|
|
Inventory
|
200
|
|
|
|
|
Total current assets
|
350
|
|
Long-term debt
|
400
|
|
|
|
|
|
|
|
Gross fixed assets
|
1,000
|
|
Common stock
|
200
|
|
Accumulated depreciation
|
200
|
|
Retained earnings
|
480
|
|
Net fixed assets
|
800
|
|
Total equity
|
680
|
|
Total
|
1,150
|
|
Total
|
1,150
|
|
|
|
|
|
|
|
2013 Balance Sheet
|
|
|
Cash
|
70
|
|
Accounts payable
|
100
|
|
Accounts receivable
|
130
|
|
Total current liab.
|
100
|
|
Inventory
|
220
|
|
|
|
|
Total current assets
|
420
|
|
Long-term debt
|
450
|
|
|
|
|
|
|
|
Gross fixed assets
|
1,120
|
|
Common stock
|
250
|
|
Accumulated depreciation
|
270
|
|
Retained earnings
|
470
|
|
Net fixed assets
|
850
|
|
Total equity
|
720
|
|
Total
|
1,270
|
|
Total
|
1,270
|
|
|
|
|
|
|