General Mills (NYSE: GIS) is a large manufacturer and distributor of package consumer food products.

General Mills (NYSE: GIS) is a large manufacturer and distributor of package consumer food products.

Question
	
General Mills
(NYSE: GIS) is a large manufacturer and distributor of package consumer food
products. Benoit Gagnon, a buy-side
analyst covering General Mills, has studied the historical growth rates in
sales, earnings, and dividends for GIS, and also has made projections of future
growth rates. Gagnon expects the current
dividend of 1.10 per share to grow at 6 percent for the next two years, and
that the growth rate will decline to 3 percent and remain at that level
thereafter.



The risk-free rate
is 4%, the market risk premium is 6%, and GIS’s beta, assumed to be 0.50. 















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Required:



Compute the value
of one share of GIS stock using Dividends Valuation Approach.






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 Shady Sunglasses operates retail sunglass
kiosks in shopping malls. Below is information related to the company:







 

 
 
(dollar amounts in thousands)

 		
 
 
2014

 		
 
 
2015

 		
 
 
2016

 		
 
 
2017

 		
 
 
2018

 		
 
 
2019

 		


 

 
 
Net Cash Flow from Operations

 		
 
 
564

 		
 
 
628

 		
 
 
854

 		
 
 
1059

 		
 
 
1345

 		
 
 
1655

 		


 

 
 
Interest Expense after tax

 		
 
 
122

 		
 
 
134

 		
 
 
148

 		
 
 
145

 		
 
 
155

 		
 
 
148

 		


 

 
 
Decrease (Increase) in Cash Required for
 Operations

 		
 
 
-75

 		
 
 
-54

 		
 
 
-48

 		
 
 
-32

 		
 
 
-61

 		
 
 
-48

 		


 

 
 
Net Cash Flow from Investing

 		
 
 
-287

 		
 
 
-300

 		
 
 
-310

 		
 
 
-285

 		
 
 
-294

 		
 
 
-277

 		


 

 
 
Net Cash from Debt Financing

 		
 
 
210

 		
 
 
204

 		
 
 
140

 		
 
 
85

 		
 
 
-40

 		
 
 
-46

 		


 

 
 

 		
 
 

 		
 
 

 		
 
 

 		
 
 

 		
 
 

 		
 
 

 		


 

 
 
Present Value Factors (Re =
 8.5%)

 		
 
 
0.922

 		
 
 
0.849

 		
 
 
0.783

 		
 
 
0.722

 		
 
 
0.665

 		
 
 

 		


 

 
 
Common Shares Outstanding 

 
in thousands

 		
 
 
1,512

 		
 
 

 		
 
 

 		
 
 

 		
 
 

 		
 
 

 		









Required: 



1.
Using the above information and assuming that steady-state growth of
FCFE in year 2019 and beyond will be 4%, calculate Shady Sunglasses’ current
stock value per share using FCFE valuation model. Remember to adjust the present value for
midyear discounting.






2. Using the above information and
assuming that steady-state growth of FCFF in year 2019 and beyond will be 4%,
and WACC = 8.5%, compute Shady Sunglasses’ current firm value per share using
FCFF valuation model. Remember to adjust
the present value for midyear discounting.