Question
Use the financial statements shown below to answer the next three questions. Free cash flow is expected to grow at 3 percent after 2017. The weighted average cost of capital is 7.18 percent.
The bonds are currently selling at 97.5% of par. The preferred stock has a current market value of $8,000.
Balance Sheet
|
Actual
2016
|
Projected
2017
|
|
Actual
2016
|
Projected
2017
|
|
Cash
|
10,000
|
15,000
|
Accounts payable
|
20,000
|
35,000
|
|
Marketable securities
|
20,000
|
10,000
|
Notes payable
|
10,000
|
0
|
|
Accounts Receivable
|
25,000
|
35,000
|
Accruals
|
15,000
|
20,000
|
|
Inventory
|
40,000
|
55,000
|
Total current liabilities
|
45,000
|
55,000
|
|
Total Current Assets
|
95,000
|
115,000
|
Long term bonds
|
10,000
|
15,000
|
|
|
|
Preferred Stock
|
5,000
|
5,000
|
|
|
|
Common stock (par + PIC)
|
50,000
|
90,000
|
|
|
|
Retained earnings
|
30,000
|
35,000
|
|
Net fixed assets
|
45,000
|
85,000
|
Total common equity
|
80,000
|
125,000
|
|
|
|
|
|
|
|
Total assets
|
140,000
|
200,000
|
Total liabilities & equity
|
140,000
|
200,000
|
Income Statement
|
Actual 2016
|
Projected 2017
|
|
Sales
|
400,000
|
600,000
|
|
Operating expenses
|
378,500
|
450,000
|
|
Depreciation
|
3,000
|
3,500
|
|
Earnings before interest & taxes
|
18,500
|
146,500
|
|
Interest
|
2,500
|
3,000
|
|
Earnings before taxes
|
16,000
|
143,500
|
|
Taxes
|
8,000
|
71,750
|
|
Net income before preferred dividends
|
8,000
|
71,750
|
|
Preferred dividends
|
1,000
|
1,000
|
|
Net Income available for common
|
7,000
|
70,750
|
|
Common dividends
|
1,500
|
65,750
|
|
Addition to retained earnings
|
5,500
|
5,000
|
|
Number of shares
|
3,500
|
6,000
|
1. What is the free cash flow for 2017?
2. What is the value of operations as of 2016?
3. What is the price per share for 2016?