Financial Analysis for Ralph Lauren Corporation Essay

1403 Words Oct 16th, 2013 6 Pages
Abstract

Ralph Lauren Corporation (NYSE:RL) is well known in the apparel clothing field. The corporation engages in the design, marketing and distribution of lifestyle product. This analysis paper will illustrate the current financial situation and forecast the future free cash flow based on the previous financial statement and financial data collected. These information and forecast are served for the potential investor to have a general understanding of RL Corporation and make the right choice on their money.

Financial Analysis for Ralph Lauren Corporation

Ralph Lauren, an American designer, established the brand Polo Ralph Lauren in 1967. At first, Ralph Lauren’s collection was
…show more content…
It can be presented as WACC = wdrd(1-T) + wsrs.

The long-term debt for RL Corporation is $274,400 on 2012. 4.5%, rd, is the interest rate for this long-term debt. rd(1-T), the after-tax component cost of debt. The effective tax rate is 32.9%. Therefore, the rd(1-T) equals to 3.0%. For the cost of equity, rs = rRF + (RPM)b. From the Wall Street Journal, we can get the 10-year Treasury bond rate is 4.5%, which is considered as the risk free rate (rRF). The market risk premium (RPM) can be calculated by subtracting the required market return from the risk free rate. rm = D1/P + g = 1.6% + 12.9% = 14.5%. RPM = 14.5% - 4.5% = 10%. The beta equals to 1.24. Therefore, the rs = 4.5%+10.0%*1.24 = 16.9%. WACC = (274,400/4,318,000)*3.0% + (4,043,600/4,318,000)*16.9% = 0.0019 + 0.1583 = 16.0%.

Actual Projected (in million) 2012 2013 2014 2015 2016
Net revenues 6859.5 7744.4 8743.4 9871.3 11144.7
Cost of sales (2861.4) (3230.5) (3647.3) (4117.8) (4648.9)
Gross profit 3998.1 4513.9 5096.1 5753.5 6495.8
Selling, general and administrative Exp. (2915.2) (3291.3) (3715.8) (4195.2) (4736.4)
Depreciation and amortization 225.2 254.3 287.0 324.1 365.9
EBIT 1039.4 1173.5 1324.9 1495.8 1688.7
Foreign currency losses (1.5) (1.7) (1.9) (2.2) (2.4)
Interest Expense (24.5) (27.7) (31.2) (35.3) (39.8)
Interest and other income 11.0 12.4 14.0 15.8 17.9
Equity in income (9.3) (10.5) (11.9) (13.4) (15.1)
EBT

Related Documents