What is its free cash flow? A company has EBIT of $30 million, depreciation of $5million, and a 40% tax rate. It needs to spend $10 millionon new fixed assets and $15 million to increase itsoperating current assets. It expects its accounts payable toincrease by $2 million, its accruals to increase by $3million, and its notes payable to increase by $8 million.The firm's current liabilities consist of only accountspayable, accruals, and notes payable.Required:What is its free cash flow?

I utilized the standard FCF method, which takes into consideration the company's operating earnings,…

Answered: A company has EBIT of $30 million,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate. It needsto spend $10 million on new fixed assets and $15 million to increase its operating currentassets. It expects its accounts payable to increase by $2 million, its accruals to increase by$3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consistof only accounts payable, accruals, and notes payable. What is its free cash flow?
A company has EBIT of P30,000,000, depreciation of P5,000,000, and a 40% tax rate. It needs to spend P10,000,000 on new fixed assets and P15,000,000 to increase its currents assets. It expects its accounts payable to increase by P2,000,000, its accounts to increase by P3,000,000, and its notes payable to increase by P8,000,000. The firm’s current liabilities consist of only accounts payable, accruals and notes payable. What is its free cash flow?
Your company’s assets have an unlevered value of 25,456,890 USD and the perpetual annual unlevered cash produced is 1,750,000 USD. The Company decides to go through with a recapitalization, after which the debt-to-equity ratio (which the company decides to keep constant) is equal to 2.5. What is the value of debt if the interest rate is 2.45% and the tax rate is 36%?
BNB bank estimates that its total revenues will amount to $350 million, and its total expenses (including taxes) will equal $220 million this year. Its liabilities total $3,800 million while its equity capital amounts to $110 million. What is the bank's return on assets? Is this ROA high or low? How could you find out?
Suppose that Rose Industries is considering the acquisition of another firm in its industry for $137 million. The acquisition is expected to increase Rose's free cash flow by $5 million the first year, and this contribution is expected to grow at a rate of 4% every year thereafter. Rose currently maintains a debt to equity ratio of 1, its corporate tax rate is 21%, its cost of debt rD is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition. The Free Cash Flow to Equity (FCFE) for the acquisition in year O is closest to ($ Million) (2 decimal places):
Menendez Corporation expects to sell $ 12 million. Costs, excluding depreciationtion, will represent 75% of sales and a depreciation of $ 1.5 million is expected.Sales will be collected in cash and all costs less depreciation will bebe settled during the year. The federal and state tax rate is 40%.to. Prepare an income statement. What will the company's expected net cash flow be?b. Suppose that Congress modified the tax laws and that doubled thecompany pricing. There were no changes in operations. How would it affectThat in recorded earnings and net cash flow?c. Now suppose that Congress did not double depreciation but reduced it byfifty%. How will that affect net cash flow?d. If it were your company, would you prefer Congress to double depreciation spendingtion or cut it in half? Explain your answer.
s
Please solve the below with detailed explanation
Peterson Packaging Corp. has $9 billion in total assets. The company's basic earning power (BEP) ratio is 9 percent, and its times interest earned ratio is 3.0. Peterson's depreciation and amortization expense totals $1 billion. It has $0.6 billion in lease payments and $0.3 billion must go towards principal payments on outstanding loans and long-term debt. What is Peterson's EBITDA coverage ratio?
A company has £350 million of long-term debt in issue paying interest at a rate of 4%, and plans to maintain this level of debt going forward. The marginal tax rate faced by the firm is 25%. Assuming that the company is sufficiently profitable, the present value of the tax shield on interest expense is: a. £84.135m b. £3.365m c. £3.5md. £87.5m
The karson transport company currently has net operating income of $508,000 and pays interest expenses of $205,000. The company plans to borrow $1.03 million on which the firm will pay 11 percent interest. The borrowed money will be used to finance an investment that is expected to increase the firm’s net operating income by $404,000 a year. B. What effect will the loan and the investment have on the firm’s time interest earned ratio? The new times interest ratio is Round to two decimal places.
A DI has assets of $10 million consisting of $1 million in cash and $9 million in loans. The DI has core deposits of $6 million, subordinated debt of $2 million, and equity of $2 million. Increases in interest rates are expected to cause a net drain of $2 million in core deposits over the year. The average cost of deposits is 6 percent, and the average yield on loans is 8 percent. The DI decides to reduce its loan portfolio to offset this expected decline in deposits. What will be the effect on net interest income and the size of the DI after the implementation of this strategy? If the interest cost of issuing new short-term debt is expected to be 7.5 percent, what would be the effect on net interest income of offsetting the expected deposit drain with an increase in interest-bearing liabilities? What will be the size of the DI after the drain if the DI uses this strategy? What dynamic aspects of DI management would further support a strategy of replacing the deposit…

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