Standard, Inc. reported EBIT of $35 million for last year. Depreciation expense totaled $20 million and capital expenditures came to $7 million. Free cash flow is expected to grow at a rate of 6 percent for the foreseeable future. Stuart faces a 21 percent tax rate and has a .40 debt to equity ratio with $120 million (market value) in debt outstanding. Standard's equity beta is 1.25, the risk-free rate is currently 5 percent and the market risk premium is estimated to be 7.5 percent. What is the current value (in millions) of Standard's equity?

$710.84 million

Explanation:

Net income = $35 million

Depreciation = $20 million

Capital expenditures = $7 million

Tax rate = 21%

D/E ratio = 0.4

Growth rate = 6%

Equity beta = 1.25

So, firm's asset beta = Equity beta/(1 + D/E*(1-T))

= 1.25/(1 + 0.4*(1-0.21))

= 0.94985

So, Free Cash Flow to the Firm= NI + Depreciation - Capital expenditures

= 35 + 20 - 7

= $48 million

Risk free rate Rf = 5%

Market risk premium = 7.5%

So, firm cost of capital using CAPM is Rf + Beta*(MRP)

Kc = 5 + 0.94985*7.5

Kc = 12.1239

So, Firms value using constant dividend growth model:

FV = FCF*(1+g)/(Kc-g)

FV = 48*1.06 / 0.121239-0.06

FV = 50.88 / 0.061239

FV = 830.8430901876255

FV = $830.84 million

Debt = $120 million

Market Value of equity = FV - Debt

Market Value of equity = $830.84 million - $120 million

Market Value of equity = $710.84 million

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

answer; ///product strategy;