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Posted: July 27th, 2021
The total dividend paid JBH during the past year 31cents per share
The Equity cost of
Capital = 13%The total dividend
paid JBH during the past year 31cents per share and the interim dividend was
59cents thus the difference is 59-31= 28cents per share.Investor expects
growth rate in dividends to be
·
5.69%
·
7%Constant growth rate
formula.png">=0.31(1.0569)/0.13-0.0569
= 0.327639/ 0.0731 =$4.48 value of share
=0.31(1.07)/0.13-0.07=
0.3317/ 0.06= $5.52 value of
share(b) Update the
valuation of JB Hi-Fi shares on pages 298-299 of the text, starting with JB
Hi-Fi sales in the financial year ending June 20151.
Assume all the same input data, except update the cash, debt and shares
outstanding figures to their end of 2015 financial year values. (3 marks)(Operating Revenue
$millions)1Year20152016201720182FCF forecast ( in
Millions $)3Sales3,652.143,834.7474,026.484,227.804Growth versus prior
year .docx#_ftn1" title="">[1]5%5%4%4%5EBIT ( 5%) of sales
.docx#_ftn2" title="">[2]182.61191.73199.4207.36Less income tax
(30%)54.857.559.862.27Plus depreciation00008Less capital
expenditures00009Less increase in
NWC (20%∆ Sales .docx#_ftn3" title="">[3]33.636.530.631.910FCF94.297.7108.9113.3Share Price is
calculated by
1.
Terminal
Enterprise Value: 5% growth rate and assumption 3% growth rate for 2018
V2015=.png"> $1,2362.
Present
Value from the terminal value:V0(2015)= (1236.1/1.13)= $1,094 Million3.
JBhifi share price :
P0 = V0+cash0- debt/ shares outstanding
2015=$1094.1+49-140/99= $12.96 or $13(c) Compare your valuations in (a) and (b)
to each other and to JB Hi Fiâs actual share price at 30 June 2015. Explain the
differences and discuss whether you would recommend buying the shares. (2.5
marks)
A)
2015=$4.48 value of share
2015=$5.52 value of shareb)
at 2015= $13 value of shareThe situation above has price differences
between all 3 shares and are significantly different whilst all having
different growth rates.The equity cost of capital is 13% and the constant dividend growth was 5.69% and 7%. The
earnings are changing between the figures which means the company is growing.
The value of shares for both are approximately starting from $4.48 and $5.52
with the $1.04 difference, while option b is at $11.82. for option B the firms
free cash flow which is approximately $94.2 million so this has allowed me to
calculate the terminal value of the firm. In this situation I would recommend
buying the shares based on the analysis that has been calculated from above..docx#_ftnref1" title="">[1] Calculated from future year / previous year..docx#_ftnref2" title="">[2] EBIT = Sales * 5%
.docx#_ftnref3" title="">[3] EBIT-Income Tax- ( change in NWC)*20%
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