A. Use the following information for the next problem sets. Consider the
following information that you propose to use to obtain an estimate of year 2004
EPS for the MacLog Company.
In addition a regression analysis indicates the following relationship between
growth in sales per share for MacLog and GDP growth is %D Sales per
share=0.015+0.75(%D GDP)
l GDP(Year 2003): 11,000 Billion
l GDP growth(Estimated Year 2004): 3.5%
l Sales per share: $800
l Operating profit margin: 12%
l Depreciation/Fixed Assets: 14%
l Fixed asset turnover:2
l Interest rate:3.5%
l Total asset turnover:0.7
l Debt/Total assets:45%
l Tax rate:36%
1. Calculate GDP for the year 2004:
11,000*1.035=11,385 Billion
2. Estimate the firm Estimate the firm s growth rate in sales per share:
0.015+0.75*0.035=0.04125
3. Estimate the firms sales per share for the year 2004:
800*1.04125=833
4. Calculate the firm’s year 2004 EBITDA per share:
833*0.12=99.96
5. Obtain an estimate of the per share depreciation charge for the year 2004:
Fixed asset= 833/2=416.5 Depreciation=416.5*0.14=58.31
6. Calculate the per share EBIT for the year 2004:
=EBITDA- depreciation
=99.96-58.31=41.65
7. Calculate the firm’s level of Total Assets per share for the year 2004:
833/0.7=1190
8. Calculate the firm’s level of debt for the year 2004:
1190*0.45=535.5
9. Calculate the per share interest rate charge for the year 2004:
535.5*0.035=18.7425
10. Calculate the firm’s EBT per share for the year 2004:
41.65-18.7425=22.9075
11. Calculate the firm’s EPS for the year 2004:
22.9075*(1-36%)=14.6608
B. Use the following information for the next problem
As an economist for a research firm you are forecasting the market P/E ratio
