Beagle Beauties engages in the development, manufacture, and sale of a line of cosmeticsdesigned to make your dog look glamorous. Below you will find selected information necessaryto compute some valuation estimates for the firm. Assume the values provided are from year-end2019. Also assume that the firm's equity beta is 1.60, the risk-free rate is 2.25 percent, and themarket risk premium is 7.0 percent.Dividends per shareReturn on equityBook value per share$ 2.109.50%$17.502019 valueAverage price multipleForecasted growth rateEarnings$ 5.0013.1013.51%Cash Flow$ 6.609.4511.38%Sales$25.652.397.21%The required return is 13.45 percent. Use the clean surplus relationship to calculate the shareprice for Beagle Beauties with the residual income model. (Do not round Intermediatecalculations. Round your answer to 2 decimal places.)* Answer is complete but not entirely correct.Share priceS27.91 X

Residual income valuation model is a metric that assumes a clean surplus relationship in equity…

Answered: Beagle Beauties engages in the…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter5: Evaluating Operating And Financial Performance

Section: Chapter Questions

Problem 1dM

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Karen Lamont is in the process of starting a new business and wants to forecast the first year's income statement and balance sheet. She has made several assumptions, which are shown below: Lamont has projected the firm's sales will be $1 million in the first year. She believes that the operating and gross profit margins will be 20 percent and 50 percent, respectively. For working capital, Lamont has estimated the following: Accounts receivable as a percentage of sales: 12% Inventory as a percentage of sales: 15% Accounts payable as a percentage of sales: 7% Accruals as a percentage of sales: 5% A bank has agreed to loan her $300,000, consisting of $100,000 in short-term debt and $200,000 in long-term debt. Both loans will have an 8 percent interest rate. The firm's tax rate will be 30 percent. Lamont will need to purchase $350,000 in plant and equipment. Lamont will provide any other financing needed.Based on Lamont's assumptions in Situation 3, prepare a pro forma income…

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