Escolar Documentos
Profissional Documentos
Cultura Documentos
Prepared by:
Md. Akther Uddin (ID# 1400225)
Mohammed Zubair (ID#1400047)
Mohammed Kaleemuddin (ID#1400232)
Syed Najibullah (ID#1300177)
Prepared for:
Dr. Merouane Lakehal-Ayat
Professor of Finance, Bittner School of Business,
St. John Fisher College, Rochester, New York
&
Visiting Fellow, INCEIF
Table of Contents
firms free publication A Beginners Guide to Skywatcing was very popular at astronomy
clubs and star parties around the country.
2.0 Compound average annual rates of growth for SCIs revenue and net income
Diagram 1: Annual growth rate of Sales and Net Income (year on year)
60%
50%
40%
30%
Sales
20%
Net Income
10%
0%
Table 1: Compounded Annual Growth Rate of Sales and Net Income at 2003
9- year CAGR (at 2003)
Year
1994 $
Sales
Net Income
75,00,000.00 $
9,00,000.00
1995 $ 1,03,12,500.00 $
12,67,500.00
1996 $ 1,20,00,000.00 $
14,40,000.00
1997 $ 1,87,50,000.00 $
21,56,250.00
1998 $ 2,13,75,000.00 $
22,50,000.00
1999 $ 2,32,50,000.00 $
26,73,750.00
2000 $ 2,73,75,000.00 $
30,11,250.00
2001 $ 3,18,75,000.00 $
32,25,000.00
2002 $ 3,41,25,000.00 $
33,75,000.00
2003 $ 3,86,25,000.00 $
34,22,700.00
Sales
Net Income
19.97%
16.00%
(1+g)
Current Market Price, P0
Cost of equity,
$
$
4.56
32%
16%
1.69
18.00
25.40%
0.075
30%
5.3%
0.075
30%
5.3%
$
(1+g)
Current Market Price, P0
Cost of equity,
$
$
4.56
32%
16%
1.69
18.00
25.40%
20.75%
* [Coupon rate, SCI's outstanding long-term debt is used as it is the cost of historical debt]
major competitors in the market? What is the SCIs market share? What trends are taking place
in amateur and professional astronomy? How do customers buy telescopes (Internet versus
personal sales)? What types of profitability can be expected in telescope accessories? What
opportunities exist for expansion? What are the potential weaknesses of manufacturing overseas
and licensing SCI's telescope designs?
All of these things need to be addressed before investors will feel comfortable with SCI. In
addition, Ruby must be equipped to present various sources of information that she uses when
preparing her presentation (including financial statements: income statement, balance sheet, cash
flow statements, statement of retained earnings). Moreover, trade-related and popular
publications such as "Sky and Telescope" often provide a great deal of important information
regarding competition and trends in the industry. As mentioned above, institutional investors are
more likely than individual investors to push SCI to ensure growth and a long-term vision, who
may tend to focus on short-term returns. Furthermore, institutional investor will play a more
"active" role in the management of the firm, and may even try to get exclusive representation on
the board of directors. In general, institutional investors will watch things more closely and
expect more attention from the managers at the SCI.
Bibliography:
Brigham, E., & Ehrhardt, M. (2013). Financial management: theory & practice. Cengage
Learning. pp.335-378
http://zanders.eu/nl/publicaties/artikel/wacc-practical-guide-for-strategic-decision-making-part-1
http://thatswacc.com/
http://www.investopedia.com/terms/c/cagr.asp
Appendix
5625
5625
11250
Current Liabilities
Long-Term Debt
1500
2250
1500
6000
11250
Sales
Net Income
EPS
1994
$75,00,000.00
$9,00,000.00
$1.20
1995
$1,03,12,500.00
$12,67,500.00 $1.69
1996
$1,20,00,000.00
$14,40,000.00 $1.92
1997
$1,87,50,000.00
$21,56,250.00 $2.88
1998
$2,13,75,000.00
$22,50,000.00 $3.00
1999
$2,32,50,000.00
$26,73,750.00 $3.57
2000
$2,73,75,000.00
$30,11,250.00 $4.02
2001
$3,18,75,000.00
$32,25,000.00 $4.30
2002
$3,41,25,000.00
$33,75,000.00 $4.50
2003
$3,86,25,000.00
$34,22,700.00 $4.56
Exhibit 3. Scope City Inc: Book Values, Market values and Target Capital
Structure (thousands in dollars, December 31,2003)
Balance Sheets
Assets
Current Assets
Fixed Assets
Total Assets
5625
5625
11250
1500
2250
3750
1500
6000
7500
11250
Exhibit 4. Scope City Inc: Book Values, Market values and Target Capital Structure (thousands in dollars, December
31,2003)
Balance Sheets
Investor-Supplied Capital
Book(Historical)
Market
Assets
Current Assets
5625
Fixed Assets
5625
Total Assets
11250
Percentage
Book
of Total
value
1500
13.3%
Long-Term Debt
Total Liabilities
Common Stock ($2 par value)
2250
3750
1500
20.0%
33.3%
13.3%
2250
2250
1500
23.08%
23.08%
15.38%
6000
7500
11250
53.3%
66.7%
100.00%
6000
7500
9750
61.54%
76.92%
100%
Retained Earnings
Total common equity
Total Liability & Equity
Percent
of Total
Market
value
2250
2250
Percent
of Total
Target
Capital
Structure
=14%
14%
=86%
13500
15750
86%
100%
100%