a) Compute Magna Corp's Free Cash Flow assuming the following: $400 million Operating income: Depreciation & amortization: Interest expense: Capital expenditures: amortization $30 million $40 million 120% of depreciation & Income tax rate: Dividends: Increase in accounts receivable: Decrease in inventory: Decrease in accounts payable: 35% $20 million $10 million $5 million $15 million b) Using a 2% perpetuity growth model and a WACC of 10%, what is the expected value of Magna Corp? c) Using the Dividend Discount Model and the same assumptions as in (b), propose a value for Magna Cогp.

a) Compute Magna Corp's Free Cash Flow assuming the following: $400 million Operating income: Depreciation & amortization: Interest expense: Capital expenditures: amortization $30 million $40 million 120% of depreciation & Income tax rate: Dividends: Increase in accounts receivable: Decrease in inventory: Decrease in accounts payable: 35% $20 million $10 million $5 million $15 million b) Using a 2% perpetuity growth model and a WACC of 10%, what is the expected value of Magna Corp? c) Using the Dividend Discount Model and the same assumptions as in (b), propose a value for Magna Cогp.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assuming the reinvestment rate is 5%, in order for the Annual Compound Growth Rate of Capital to equal the Internal Rate of Return, which of the following statements is correct? IRR= n 0 1 2 3 4 $ 5 $ es is is is i $ $ $ $ Investment $ (1,000,000) 80,000 83,333 86,667 88,667 1,224,667 10.70% The after tax reinvestment rate would have to be higher than the IRR The after tax reinvestment rate would have to be lower than the IRR There is not enough information to answer this question The after tax reinvestment rate would have to be equal to the IRR
A firm has recorded EBIT at $1,800, depreciation at $600, EBT at $1,700 and a tax rate of 40%. Find the operating cash flows for this firm. Hin #1t: Operating CF = EBIT + depreciation - tax. Hint #2: Tax = EBT * tax rate.
Consider a company with earnings before interest and taxes (EBIT) of $450,000, tax rate of 16%, depreciation and amortization expenses of $60,000, capital expenditures of $80,000, acquisition expenses of $30,000 and change in working capital of $40,000. How much is its free cash flow during that period? Round to the nearest cent.
use the following information to develop a spreadsheet model that will calculate the free cash flows and the value of the equity for the company. cost of capital 12% most recent year's sales $1000 nonoperating assets $100 interest-bearing debt $250 operating profit margin 12% working capital/sales 35% fixed assets/sales 20% noninterest-bearing current liabilities/sales 10% rax rate 40% forecasted sales growth years 1-2 12% years 3-5 8% years 6-∞ 4% calculate the value of the firm and the value of the equity in the firm using DCF analysis.
For the cash flows and interest rate shown below, determine the present worth 600 Cash flow in year one ($) Cash flow percent increase per year (%) 10% Interest rate (%) 4% Number of years ten
5. Eagle Products' EBIT is $680, its tax rate is 30%, depreciation is $42, capital expenditures are $82, and the planned increase in net working capital is $48. What is the free cash flow to the firm?
If the discounted Free Cash Flows for a company after two years of operating = $3500 . and the required rate of return = 10% Then the undiscounted cash flows would be :- Select one: a. 3181 b. 4235 C. 4658 d. 2629
Use the below information to value a levered company with annual perpetual cash flows fror that grow. The next cash flow will be generated in one year from now. Data on a Levered Firm with Perpetual Cash Flows Item Value Item full name abbreviation OFCF (millions) Operating free cash flow $5 3% pa 2% pa 8.6% pa 40% pa 30% Growth rate of OFCF TEL E/V to Cost of debt Cost of levered equity Equity to assets ratio, where the asset value includes tax shi Corporate tax rate The current value of levered equity is O a. 81.94 O b. 113.94 O c. 31.35 O d. 156.25 O e. 234.38
Young & Liu Inc.'s free cash flow during the just-ended year (t = o) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions? a. $998 O b. $1,050 Oc$1,158 Od. $948 Oe. $1,103
Projected Operating Assets Berman & Jaccor Corporation's current sales and partial balance sheet are shown below. Sales Balance Sheet: Assets Cash Short-term investments Accounts receivable Inventories Total current assets Net fixed assets Total assets This year $1,000 $ 200 $ 90 $ 300 $300 $ 890 $ 450 $1,340 Sales are expected to grow by 12% next year. Assuming no change in operations from this year to next year, what are the projected total operating assets? Do not round intermediate calculations. Round your answer to the nearest dollar.
H3. Please show proper step by step calculation

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