答案和详解如下： 1.Flyaweight Foods is a vertically integrated producer and distributor of low-calorie food products operating on a consumer club model. They have enjoyed rapid growth in the southwest United States during their 5-year history and are planning rapid expansion throughout the rest of the country. To fund their expansion, they are soliciting investments from a variety of venture capital groups. One of the groups considering a bid for Flyaweight is Angelcap Investors, a private equity fund run by Harry Moskowitz. Angelcap is interested in acquiring a 10% interest in Flyaweight. Moskowitz’ partner, Bill Sharpless, runs the group doing due diligence on Flyaweight. He provides Moskowitz with financial data on the firm: Table 1: Flyaweight Foods Historical Data
(Dollars per share)
| FY1 | FY2 | FY3 | FY4 | FY5 | Sales per share | 4.25 | 5.60 | 6.40 | 7.35 | 8.05 | EPS | 1.20 | 1.85 | 2.30 | 2.79 | 3.10 | Dividends | 0 | 0 | 0.10 | 0.20 | 0.35 | Free Cash Flow | -2.50 | -2.10 | -1.85 | -1.60 | -1.25 |
Moskowitz suggests that a Dividend Discount Model (DDM) would be an appropriate means for valuing Flyaweight because Angelcap would be a minority shareholder. Sharpless points out that the primary advantage of using a DDM is that dividends are more stable than earnings or cash flow. They ask Merle Muller, an analyst at the firm, to calculate an appropriate required return on Flyaweight. Muller collects the following market consensus information: Table 2: Current Market Conditions
(Consensus estimates)
Expected 5-year EPS growth | 8.0% | Expected 1-year Dividend yield | 2.2% | Current Treasury yield (10-year note) | 4.8% | Food industry beta (specialty segment) | 0.95 |
Muller says, “If we assume that the beta for Flyaweight should equal the beta of the specialty food industry, then our required rate of return in less than 10%.” Moskowitz disagrees strongly with using a discount rate that low and insists on using a multi-factor model such as the Arbitrage Pricing Theory (APT) instead. Sharpless disagrees that the APT will solve the estimation problem, pointing out, “A principal limitation of both the Capital Asset Pricing Model (CAPM) and the APT is uncertainty about the correct measurement of the market and factor risk premiums.” Sharpless argues in favor of using the Gordon Growth Model (GGM). “We know what the company growth rate is, we know what the dividend is, and we can decide what our required rate of return is. The GGM will give us the most accurate valuation because it uses the inputs we can measure most accurately.” Moskowitz points out, “An H-model would be more appropriate because it assumes a linear slowdown in growth to a constant rate in perpetuity.” While Sharpless and Moskowitz debate the appropriate valuation approach, Muller prepares forecasts for Flyaweight. Table 3: Forecast Values for Flyaweight < >> | Forecast | Average total liabilities per share | $14.40 | Average owners’ equity per share | $12.70 | Profit margin | 29% | Sales per share | $10.70 | Dividend payout ratio | 10% |
Judging by the data in Table 1, the most appropriate method for valuing Flyaweight would be: A) the DDM because the firm has a history of dividend growth. B) free cash flow to equity because the dividend payout ratio is unstable. C) residual income because the firm is likely to have high capital demands and negative cash flow for the foreseeable future. D) justified P/E because it is a high-growth company. The correct answer was C) A residual income model is appropriate for firms with long term negative free cash flow due to high capital demands. A DDM would not be appropriate since the dividend payout ratio is fluctuating widely. Free cash flow to equity is not appropriate because the firm needs its cash for reinvestment. Justified P/E is not a preferred valuation method for high-growth companies because it assumes a constant growth rate in perpetuity. 2.Regarding their statements about calculating a required rate of return for Flyaweight? A) Correct Incorrect
B) Correct Correct C) Incorrect Incorrect D) Incorrect Correct The correct answer was B) Sharpless is correct that uncertainty surrounding estimates of inputs and risk premiums is a key limitation of both the CAPM and the APT. Muller is correct that the required rate of return on Flyaweight is less than 10% if the beta of the specialty foods industry is used:
Equity risk premium: one-year dividend growth + long-term EPS growth – long-term risk free rate
Equity risk premium = 2.2% + 8.0% – 4.8% = 5.4% Thus the required rate of return is: Required rate of return = Risk free rate + (beta × market risk premium)
Required rate of return = 4.8% + (0.95 × 5.4)
Required rate of return = 9.9% 3.With respect to their statements about the use of the GGM and the H-model? A) Correct Correct B) Correct Incorrect C) Incorrect Correct D) Incorrect Incorrect The correct answer was B) Moskowitz is correct that an H-model assumes a linear slowdown in growth until a constant growth rate is achieved. Sharpless is incorrect that the GGM would be an appropriate technique for valuing Flyaweight because the GGM assumes a constant rate of growth in perpetuity and Flyaweight has not yet reached a constant growth rate. 4.Which of the following is least likely to be a characteristic of a company in the initial growth phase? A) Return on equity equal to the required rate of return. B) High profit margin. C) Negative free cash flow to equity. D) Low dividend payout ratio. The correct answer was A) Companies in the initial growth phase tend to have a return on equity higher than the required rate of return, along with high profit margins, negative free cash flow to equity and a low dividend payout. 5.With respect to their statements about the use of DDMs? A) Correct Incorrect B) Correct Correct C) Incorrect Correct D) Incorrect Incorrect The correct answer was A) Moskowitz’ statement is correct. A dividend discount approach is most appropriate when the perspective is that of a minority shareholder. Sharpless’ statement is incorrect because the primary advantage of a DDM is that it is theoretically justified. The stability of dividends is an additional advantage. | 
发表于 2008-5-20 10:07
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