Mini-Case – Finance

In order to decide on an IPO price, we must look at the current financial position of the company, as well as make projections for possible future scenarios. From the data given, we know that Prairie Home Stores (PHS) has a current book value of $80,000,000. With 400,000 outstanding shares, the book equity per share is $200. There are two possible paths for future performance to consider. The first, a constant growth scenario, assumes that PHS will continue on its current trajectory of paying out 2/3 of its earnings as dividends, and retaining the other 2/3 to grow the business.In this scenario, we will continue the company’s growth rate of 5%, with no change in plowback or dividends. In this scenario, price per share is determined by the current dividends, divided by (r-g) The value of the company will be equal to the present value of all future cash flows ( i. e. dividend payments) that investors expect to receive. Constant growth scenario: EPS 2013 = $ 12,000,000 / 400,000 shares = $ 30. 00 Book equity per share in 2013 = $80,000,000 / 400,000 shares = $200. 00 per share Dividends paid out per share in 2013 = $ 8,000,000 / 400,000 shares = $ 20. 00 per share Payout ratio in 2013 = $ 20. 0 (DIV2013) / $ 30 (EPS 2013) = 0. 67 Plowback ratio 2013 = $10. 00 (RE per share 2013) / $ 30. 00 (EPS 2013) = 0. 33 Sustainable growth rate = 0. 15 (rate of return) x 0. 33 (plowback ratio) = 5 % Price per share 2012 = DIV2013/(r-g) = $20/(11%-5% ) = $ 333. 33 $ 333. 33 price per share x 400,000 shares = $ 133,333,333 – value of the company in 2012 P/E ratio = $ 333. 33( price per share) / 30 (EPS) = 11. 11 Rapid Growth Scenario: Since Price = DIV / r-g, and there are no dividends paid in the years 2013 – 2016, we can calculate the value of the company in 2016 and discount it to obtain the Present value in 2012.EPS 2017 = $21,000,000 / 400,000 shares = $52. 50 Book equity per share 2017 = $139,900,000 / 400,000 shares = $349. 75 Dividends paid out per s hare 2017 = $14,000,000 / 400,000 shares = $35. 00 Payout ratio in 2017 = $ 35. 00 (DIV per share 2017) / $ 52. 50 (EPS 2017) = 0. 67 Plowback ratio in 2017 = $ 17. 50 (RE in 2017) / 52. 50 (EPS in 2017) = 0. 33 Sustainable growth rate = 0. 15 (rate of return) x 0. 33 (plowback ratio) = 5 % Price per share in 2016= $35. 00 (DIV 2017) / 0. 06 (r – g)= $583. 33 Let’s discount it to 2012 value: Financial calculator: FV = 583. 33 N = 4, I/Yr = 11% PV = 384. 5 – price per share in 2012 384. 25 x 400,000 shares = 153,700,000 – value of the company in 2012 under rapid growth Conclusion: Rapid growth scenario promises higher stock price, so it should be chosen. PVGO between the previous example and this one: 153,700,000 – 133,333,333 = 20,366,667 Under both scenarios, current price per share is more than $200. Now here’s my calculations: Constant growth scenario: Assuming a 15% required return: P0 = DIV1 / (r-g) = $20 / (. 15 – . 05) = $20/. 1 = $200 Assuming an 11% required return, we’ll have: P0 = DIV1 / (r-g) = $20 / (. 11 – . 05) = $20/. 06 = $333. 33In the constant growth scenario, the stock is valued at $200 if we assume a 15% expected return, and $333. 33 if we assume 11% expected return. Now, in the rapid growth scenario, things get even more exciting. I think that 2017/2020 is the horizon year, because it’s AFTER that point when the growth goes down to 5%. In paragraph 6, the problem states â€Å"†¦ would require reinvestment of all of Prairie Home’s earnings from 2016 to 2019. After that the company could resume its normal dividend payout and growth. † your book’s years:20122013201420152016201720182019 my book’s years:20152016201720182019202020212022 year #01234567 arnings growth from previous year—4. 6%15%15%15%15%5%5% dividend0000$35$36. 75$38. 59 todayH NB: neither book shows 2019 or 2022, but we know that the beginning of the year figures are the same as the end of year figures for the previous year, so that’s where I got those. Ultimately, it doesn’t really matter – I’m just reinforcing the point that we turn into a constant growth scenario beginning with year 6. Our non-constant growth model says this: PV = D1/(1+r)1 + D2 / (1+r)2 + †¦ + DH / (1+r)H + PH / (1+r)H and we get PH with this formula: PH = Dt+1 / (r-g) The dividends for the foreseeable future (years 1 – 4) will all be 0, so hose first numbers will add up to 0. We know that the dividend at the horizon year – year 5 – is $35. The expected future price of the stock at year 5 will be: P5 = D6 / (r-g) Plugging in numbers there, we have: P5 = $36. 75 / (. 15 – . 05) = $36. 75/. 1 = $367. 50 Again, that’s assuming a 15% required return. Then the third part of the process is to add up all of those numbers, discounting them to the present value: P0 = D1 + D2 + D3 + D4 + D5 / (1. 15)5 + P5 / (1. 15)5 = 0 + (35 + 367. 5) / (1. 15)5 = 402. 5/(1. 15)5 Or on the calculator: FV = 402. 50, I/YR = 15, N=5, PV = $200. 11 Then we go to the 11% required return.There, we’ll see that: P5 = D6 / (r-g) = $36. 75 / (. 11 – . 05) = $612. 50 And then: P0 = D1 + D2 + D3 + D4 + D5 / (1. 11)5 + P5 / (1. 11)5 = 0 + (35 + 612. 50) / (1. 11)5 = †¦ (Calculator: FV = 647. 50, I/YR = 11, N = 5, PV = $384. 26) In the rapid growth scenario, the stock is valued at $200. 11 if we assume a 15% expected return, and $384. 26 if we assume 11% expected return. This is the point where I defer to you, or we can talk about this more tomorrow. Our math says to price the stock somewhere between $200 and $384, but how do we choose? I get the sense that you understand that better than I do, so I can use your input for sure.We believe that Prairie Home Stores should value the stock at $384. xx because we should choose the We recommend choosing the rapid growth scenario, plowback more earnings into growing the company, and set the IPO price as $384. whatever. Our prospectus will show that we intend to invest more of our earnings into growing the company over the next 4 years, and as a result investors and the market will support a price of $384. We chose to use 11% as our expected rate of return, because this is the rate shown in the Journal of Finance as being the rate offered by other, equally risky stocks in the same industry as Prairie Home Stores.The PVGO is $153,700,000 – 133,333,333 = $20,366,667. This indicates that the company has room to grow, which will be attractive to investors. Investors believe that under the rapid growth scenario. According to our calculations, Mr. Breezeway was wise to counsel his son( ) to not sell the stock for $200, as we believe that the company is worth more than current BOOK VALUE PER SHARE – include something about this. $200 per the current values (this is what the whoever dude offered the son), but our calculations show that th e company is more valuable than the $200 price indicates.

Reflection paper about educational class Essay

Reflection paper about education class Introduction                  Child safety involves preventing the child from physical, psychological and emotional harm. I have learnt a lot from this course since child safety is a major issue in the society. This is because as a grown up I am obligated to take care of all the children. I came to learn that child safety is very crucial since it sets the foundation of the child development. This will make the children to feel appreciated and loved as the parent guide them in decision making which is very crucial in their lifetime. I also came to learn that child safety is more than providing food, shelter, education and other basic needs, but it entail protection from harm resulting from abuse and neglect. I came to learn that child are at high risk of injuries, accidents and crime which necessitate appropriate measures so as to provide a safe environment for the children. I learnt that there are several ways of enhancing child safety which include: providing a safe environment, implementing safety measures as well as educating protective measures to the children. I also learnt that parent advice is paramount as it guides the children on appropriate safety measures. Parents should also listen and respond to their children’s needs which ensure they maintain good rapport between parent and the child. In conclusion, child safety is becoming a social concern since children are likely to face many risky situations. Providing necessary child safety is very central to every child especially in their development. This is because the children grow up in a safe environment free from abuse and neglect. Children should be protected from physical, emotional and psychological harm. However, it is imperative to provide the appropriate level of child safety since overprotecting the children have adverse consequences. References Child care safety checklist for parents & child care providers. (2009). Bethesda, Md.: Consumer Product Safety Commission. Source document

ICT and Internet Essay Example | Topics and Well Written Essays - 500 words

ICT and Internet - Essay Example Meeting with friends and social contacts have been greatly intensified through Internet by using E-mail, Internet chat sessions and videophones (Livingstone S, 2002). Edutainment is delivering education and entertainment to children at their doorsteps. While this may be the scenario in the urban elite society, the rural environment is changing in a different way. The rural citizen is also getting well connected in the networked society and a new concept of urban society is taking shape. Earlier, a citizen in the distant area has to travel to pay taxes, bills etc to the government or to receive revenue documents, birth certificate and the like (James Curran, 2005). Internet Protocol (IP) has changed the computer technology, portals are created abiding Internet protocols. Programming has reached a sophisticated stage where programming languages like Java, PHP, Microsoft products like Asp.net, Visual Studio, MS Office were being used to develop web sites and portals that have become an interface between service providers and end users. Travelling portals offer different discounts for different destinations and allow customers to send their feed back via email (Raab, S., Chandra, W, 2005). Community sites Orkut, Facebook and blog sites like Blogspot helped the users not only to be in touch with each but also express their views on different subjects (James Slevin, 1999).

HR Management in the Small Business Essay Example | Topics and Well Written Essays - 1250 words

HR Management in the Small Business - Essay Example In both small and large businesses, the major functions of HR management are recruitment, selection, training, and compensation of employees (Longenecker et al., 2011). However, not all-small businesses are able to have a full functioning HR management system that can handle the above-mentioned activities in formal and efficient ways. As a result, small businesses are forced to choose to either run these activities informally or outsource them to another organization. The small businesses due to their size and level of income are in most cases not able to adapt new technologies that have been developing to improve efficiency in managing human resources. One of such technologies is the Human Resource Management System that can provide information necessary for effective decision-making (Mathis & Jackson, 2011). As a result, small business is forced to employ the outdated method of decision making which can be inefficient in our current era. Another reason that makes small business not to use such technologies is that they do not prioritize the management of human resources. Majorities of the small businesses are not able to maintain an HR department with fully qualified HR professionals necessary for effective and formal HR management. In such organizations, the owner of the business or a clerical employee who is employed to do so carries out the HR roles. Moreover, in case of new employees who are hired, the supervisors and managers do the recruiting, selecting and training (Mathis & Jackson, 2011). Due to the limitation in the HR knowledge of the people tasked with HR management mandate in small businesses, it is always found out that in most cases they fail to meet standards required. Some of these HR activities are time consuming and, thus, they largely reduce the time the people assigned to undertake them have to focus on their main role in the business. Most of these small businesses decide to outsource most of their HR activities to another organization. The outsourcing process means that a business contracts or hires another business or organization to undertake certain activities in the business on its behalf (Mathis & Jackson, 2011). The outsourced activities might be recruiting, selecting and training of employees as well as managing its HR records and employees compensations. In such a case, this helps the people involved in running the business to focus mainly on their area of specialization and, thus, makes them to be more efficient in their roles. Furthermore, it enables the business to acquire services of HR specialist in undertaking its HR activities that can result in more efficiency despite their size. The major reason why most of the small business chooses not to have an HR department to handle HR activities and issues is the relatively low interest in human resource management in their different stages of operation (Cornelius, 2001). In most cases, it is very difficult to convince a manager or owner about the fundament al contributions of an HR department in the success of their business. This makes them not to prioritize it and most of them only plan to introduce them when their businesses grow to become large corporate. However, these individuals should be convinced about the role that properly managed human resources can play in resolving their

Individualized Education Program Essay Example | Topics and Well Written Essays - 250 words

Individualized Education Program - Essay Example The law requires that if any member of the ARD does not attend a meeting he must put it into writing. There must be an agreement between the parent and the school agreeing that that member should not attend the meeting. These may be done if the expertise of that member is not needed (Bateman, Barbara D, and Mary A. Linden 1998). Another requirement is when a member of the ARD committee does not attend the meeting and his expertise is needed in the meeting he must write a letter to the school and the parent in order for them to review it before the meeting day. The school and the parents are also required to write a letter indicating the same. The contract should be renewed with conditions because it will enable the dormant member to improve on high work and also to ensure that we don’t lose a member because we had little faith for them and yet if given another opportunity they would have done better.

Compare and contrast two slave narratives from two different states Research Paper

Compare and contrast two slave narratives from two different states - Research Paper Example This was cognizant to the fact that the slave’s slavery was largely examined in economic terms. Virginia is one of the States that was found in the southern part of America. Largely, the Southern States were more preoccupied with the cotton production than the Northern part. In the first half of the 1600s, Africans had already started occupying Virginia.2 This was, whether they were enslaved or not. At the same time, Europeans were also thronging Virginia because of its vast land that would help in Agricultural production. The demand of cotton in Europe increasingly became high and the needs for extra production became a necessity. The labor that was offered by the Native Americans became unsustainable. This was mostly because European diseases affected the native America and most of them died. Landlords were therefore left with no option but to turn the African as slaves. The enslaved individuals in Virginia plantations were made to drain swamps, burned stubble, raked fields and broke grounds as a preparation for the plantation. They were also forced to drain, hoe, flood, dry and weed the fields in many occasions before the crops could be ready for harvesting. Introduction of new crops made individuals land owners richer and richer. This also affected their acquisition of slave. They owned more and more slaves and further expanded their farming from rice to cotton and even to the growing of tobacco. The planters became cruel and tyrannical to the slaves and in most cases they forced their will on the slaves to do things they wanted done. In Virginia, particular in the farms of the rich planters, Slaves were toiled in groups of 20 to 25 and a supervision of one person as an overseer. At the peak of the seasons of harvest, work for slaves increased and they could even be forced to work for more than 15 hours in a day. The overseers could whip the slaves whenever they felt like they were not doing what

Aviation rescue and fire fighting Essay Example | Topics and Well Written Essays - 2000 words

Aviation rescue and fire fighting - Essay Example Technological advances have allowed Aviation Rescue and Fire Fighting to meet the challenges that have come about with its primary function of rescuing passengers and the growing use of air transportation and larger aircraft. Aviation Rescue and Firefighting is unique in its function as at a time of an air crash the members of the Aviation Rescue and Firefighting team face the intense challenge of rescuing a possible of more than 400 passengers from within the aircraft, whose length could extend to ninety meters and a width of five meters. Starting with normal firefighting equipment and volunteers immediately after the Second World War, Aviation Rescue and Firefighting has taken giant strides to keep with the technological advancements that have caused air transportation to transform dramatically and the size of aircraft also to grow to very large extents. The job function calls for highly trained and skilled personnel operating with sophisticated firefighting and rescue equipment. (Airport Rescue & Fire Fighting Index). The main objective of Aviation Rescue and Firefighting is to save the life of the entrapped passengers from the burning aircraft and the protection of aircraft and surrounding buildings and vehicle remain a secondary objective at the time of an aircraft accident or incident. The fire hazard is extremely high and all times the need for extinguishing fires has to be at the forefront of the activities of the Aviation Rescue and Firefighting. Fires may happen when aircraft land and take off, or during an accident or when rescue operation are put into place. The rupture of the fuel tanks of the aircraft could lead to spillage of highly volatile and inflammable aviation fuels and other liquids used by aircrafts. The aviation fuel and inflammable liquids could easily burst into flames by coming in contact with hot metal parts of the aircraft, sparks caused by moving parts of the aircraft or from disruption of the electrical circuits present in the