1 Calculate Free Cash Flows To Equity Abnormal Earnings And Abnormal Earnings Growth For The Years 2018 2020 2 Assu 1 (85.68 KiB) Viewed 28 times
1. Calculate free cash flows to equity, abnormal earnings, and abnormal earnings growth for the years 2018-2020. 2. Assume that in 2021 Hugo Boss AG liquidates all its assets at their book values, uses the proceeds to pay off debt and pays out the remainder to its equity holders. What does this assumption imply about the company? a. Free cash flow to equity holders in 2021 and beyond? b. Abnormal earnings in 2021 and beyond? C. Abnormal earnings growth in 2021 and beyond? 3. Estimate the value of Hugo Boss's equity on March 29, 2018 using the above forecasts and assumptions. Check that the discounted cash flow model, the abnormal earnings model and the abnormal earnings growth model yield the same outcome. 4. The analyst estimates a target price of E77 per share. What is the expected value of Hugo Boss's equity at the end of 2020 that is implicit in the analysts' forecasts and target price? 5. Under the assumption that the historical trends in the company's ROE (i.e., approximately 25 percent), payout ratio (80 percent) and book value growth (5 percent) continue in the future, what would be your estimate of Hugo Boss's equity value-to-book ratio? 6. Calculate return on equity (ROE) for the years 2018-2020. 7. Use the five-force framework to analyze and provide conclusion for each force to explain Nike's profitability in 2018 - 2020. Provide specific and concise arguments within 600 words. 8. Provide a comprehensive and in-depth analysis of the growth and profitability of Hugo Boss in 2020 including product market strategies and financial market policies. Provide specific and concise arguments within 400 words.
Estimating Hugo Boss' equity value Hugo Boss AG is a German designer, manufacturer, and distributor of men's and women's clothing, operating in the higher end of the clothing retail industry. During the period 2004-2017, the company consistently earned returns on equity in excess of 20% with peaks around 50 to 60 percent, grew its book value of equity (before special dividends) by 5 percent per year, on average, and paid out 65-80 percent of its profit as dividends. On March 29, 2018, before the publication of the first \-quarter results, when Hugo Boss's 69 million common shares trade at about EURO71 per share, an analyst produces the following forecasts for Hugo Boss. Assume that Hugo Boss's cost of equity capital is 10 percent. Below is the information pertaining Hugo Boss in 2018-2020. 2018E 2020E 2019E 2,925 381 3,101 419 Income statement (€ millions) Revenue Profit before interest and tax Interest expense Profit before tax Tax expense Profit/loss 2,798 345 (8) 337 (88) (6) 374 413 (97) (107) 249 277 306 2017R 2018E 2019E 2020E 1.167 1.195 1,249 1.324 57 58 60 65 Balance sheet (€ millions) Net operating assets Investment assets Business assets Shareholders' equity Current and non-current debt Invested capital 1,224 1,253 1,309 1,389 1,130 915 972 1,039 309 270 259 281 1,253 1,224 1,309 1,389
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