Hello tutor answer this accounting question 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?

The problem requires the determination of the free cash flow. Free cash flow (FCF) represents the…

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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

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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?
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?
Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 million
Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is 21%, and its unlevered cost of capital is 14%. Milton also has outstanding debt of $25.57 million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without leverage? b. What is the value of Milton Industries with leverage? a. What is the value of Milton Industries without leverage? The value of Milton Industries without leverage is $ million. (Round to two decimal places.) b. What is the value of Milton Industries with leverage? The value of Milton Industries with leverage is $ million. (Round to two decimal places.)
Milton Industries expects free cash flow of $12 million each year. The corporate tax rate is 22 %, and its unlevered cost of equity is 12%. The firm also has outstanding debt of $40 million and it expects to maintain this amount permanently. What is the value of Milton Industries with leverage? a) 85, 973,333 b) 88, 573, 333 c) 89,646, 444 d) 90, 125, 564 What is the value of equity of Milton Industries with leverage? a) 76, 573, 333 b) 73,973,333 c) 77,646,444 d) 78, 125, 564
Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 million
Marpor Industries has no debt and expects to generate free cash flows of $16.82 million each year. Marpor believes that if it permanently increases its level of debt to $35.60 million, the risk of financial distress may cause it to lose some customers and receive less favourable terms from its suppliers. As a result, Marpor's expected free cash flows with debt will be only $15.32 million per year. Suppose Marpor's tax rate is 25%, the risk-free rate is 6%, the expected return of the market is 12%, and the beta of Marpor's free cash flows is 1.10 (with or without leverage). a. Estimate Marpor's value without leverage. b. Estimate Marpor's value with the new leverage.
Tool Manufacturing has an expected EBIT of $ 69,000 in perpetuity and a tax rate of 23 percent. The firm has $200,000 in outstanding debt at an interest rate of 4.5 percent, and its unlevered cost of capital is 10.4 percent. What is the value of the firm according to M&M Proposition I with taxes?
Vijay
Kohwe Corporation plans to finance a new investment with leverage. Kohwe Corporation plans to borrow $49.3 million to finance the new investment. The firm will pay interest only on this loan each year, and it will maintain an outstanding balance of $49.3 million on the loan. After making the investment, Kohwe expects to earn free cash flows of $10.7 million each year. However, due to reduced sales and other financial distress costs, Kohwe's expected free cash flows will decline to $9.7 million per year. Kohwe currently has 4.6 million shares outstanding, and it has no other assets or opportunities. Assume that the appropriate discount rate for Kohwe's future free cash flows is 7.9% and Kohwe's corporate tax rate is 40%. What is Kohwe's share price today given the financial distress costs of leverage? The price per share is $23.01 per share. (Round to the nearest cent.) C
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):

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