Fin 449
Autor: leiyu1991920 • June 9, 2016 • Exam • 703 Words (3 Pages) • 451 Views
- Market capitalization and per share price
We forecasted the number of shares outstanding, which came to be 398.05M based on historical data from 2011 to 2015 with an average rate of -5% and current share price of $164.11(4/30/2016).
Market Capitalization: $164.11 * 398.05 M = 65,323.99 M
- Historical and Forecasted FCFE
FCFE = N/I + Increase in cash - Increase in SE
$ in millions | Historical period | Forecast period | ||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Net income | 4442 | 7475 | 8040 | 8477 | 6083 | 6856 | 7709 | 8647 | 9671 | 10781 |
Increase in cash | 16220 | 16661 | (11536) | (3533) | 17505 | (20823) | 16909 | (13462) | 10611 | (8319) |
Increase in shareholders’ equity | 5337 | 2751 | 4330 | 3931 | 6891 | 8794 | 11452 | 15179 | 20422 | 27814 |
FCFE | 15325 | 21385 | (7826) | 1013 | 16697 | (22761) | 13167 | (19995) | (141) | (25352) |
Based on the historical data from GS 10-K annual reports and the forecast assumptions, we calculated the free cash flow to equity (FCFE) by using the simplest formula where
FCFe = N/I + Increase in cash - Increase in SE.
In contrast, there is a not optimistic forecast of FCFE from 2016 - 2020 ---- except 2017, most FCFE forecast during forecast period are negative, which means that there is not enough cash that can be distributed to the firm’s equity shareholders either as dividends or stock buybacks. It will affect the investment from the GS investors because they have negative expectation on return and valuation of GS. Therefore, it is a sign that the firm will need to raise more [a][b][c]capital.
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