A firm has Sales of $25,000,000, total assets of $22,000,000, current assets of $8,000,000, spontaneous liabilities of $5,000,000, a profit margin of 5 percent, a tax rate of 40%, and a dividend payout rate of 20 percent. Sales are expected to increase to $28,000,000 for the coming year, and the firm will need to increase its fixed assets at this level of sales (that is, fixed assets will increase proportionately with sales). Given this information, and using the equation approach, determine the additional funds needed for the coming year.

A firm has Sales of $25,000,000, total assets of $22,000,000, current assets of $8,000,000, spontaneous liabilities of $5,000,000, a profit margin of 5 percent, a tax rate of 40%, and a dividend payout rate of 20 percent. Sales are expected to increase to $28,000,000 for the coming year, and the firm will need to increase its fixed assets at this level of sales (that is, fixed assets will increase proportionately with sales). Given this information, and using the equation approach, determine the additional funds needed for the coming year.

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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STARS Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it expects a growth rate of 20% for the next two years. After Year 3, FCF is expected to grow at a constant rate of 6% forever. The Weighted Average Cost of Capital (WACC) is 10.00%, and the company has $85,000,000 of long-term debt (the remainder is comprised of common equity) and 12.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock? (Ch. 9) Group of answer choices 27.75 21.22 19.29 24.12 26.38
Tin Roof's net cash flows for the next three years are projected at $72,000, $78,000, and $84,000, respectively. After that the cash flows are expected to increase by 2.5 percent annually. Recently issued debt carries an interest rate of 7.85%. Tin Roof's marginal tax rate is 21%. The cost of equity is 11.4 percent. a) What is the value of the firm if it is financed with 40 percent debt and 60 percent equity? b) Tin Roof has 20,300 outstanding shares and are currently trading for $29.00 per share. At this price do you believe that Tin Roof shares are over priced, under priced or fairly priced. Please justify your answer. Please show excel formulas, Thank you
Kosm Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it expects a growth rate of 30% for the next two years. After Year 3, FCF is expected to grow at a constant rate of 4% forever. The Weighted Average Cost of Capital (WACC) is 11%, and the company has $65,000,000 of long-term debt (the remainder is comprised of common equity) and 10.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?
A company is projected to generate revenues of $336 million and $406 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 35.4%. Forecasted tax rate: 22.2%. Forecasted reinvestment rate: 30%. Forecasted steady growth rate of free cash flow: 1.3% per year. Cost of capital: 13.2%. Debt: $40 million. Cash: $35 million. Shares outstanding: 12 million.
MaxValue is expected to have EBIT of $1,500,000.00 one year from now. Because MaxValue is in a mature industry, the CEO expects the company's EBIT to grow at the stable growth rate of 2% per year forever. The firm's WACC is 9% and its corporate tax rate is 40%. Capital expenditures are 25% of EBIT while changes in networking capital is 10% of EBIT. Depreciation is 15% of EBIT. What is the value of the firm? a) $21,428,571.43 b) $8,742,857.14 c) $17,142,857.14 d) $8,571,428.57 e) $16,071,428.57
You have been assigned the task of using the corporate, or free cash flow, model to estimate Instant Corporation's intrinsic value. The firm's WACC is 9.00%, its end-of-year free cash flow (FCF1) is expected to be $60.0 million, the FCFs are expected to grow at a constant rate of 6.00% a year in the future, the company has $200 million of long-term debt and preferred stock, and it has 30 million shares of common stock outstanding. Assume the firm has zero non-operating assets. First, find the estimated value of the corporation and then the firm's estimated intrinsic value PER SHARE of common stock. Based on your result, if the stock is currently selling at $50 per share, what would you recommend, buy or sell and why?
You expect that Bean Enterprises will have earnings per share of $2 for the coming year. Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of 20% per year. If Bean's equity cost of capital is 11%, then the price of a share of Bean's stock is closest to: A. $53.31 B. $33.32 *C. $19.99 D. $13.33
You are valuing Soda City Inc. It has $129 million of debt, $79 million of cash, and 179 million shares outstanding. You estimate its cost of capital is 10.1%. You forecast that it will generate revenues of $723 million and $777 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 31%, tax rate is 24%, reinvestment rate is 43%, and terminal EV/FCFF exit multiple at the end of year 2 is 11. What is your estimate of its share value? Round to one decimal place.

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