Depreciation BIT 2020 83,492 493,294 2021 38,592 483,195 2022 37,502 293,602 2023 28,957 936,823 2024 39,572 283,957 2025

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
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Please find attached an Excel spreadsheet with forecasts for Kandy Kanes, Co. Five years of earnings, depreciation, and capital expenditures have been estimated by your equity analyst, and you believe that after the fifth year, free cash flow will grow by 4.5% per year. The market value of debt is $2,500,000 and the firm has $150,000 in marketable securities. There are 750,000 shares outstanding, the tax rate is 25%, and the discount rate (WACC) is 9%. Please do the following: Calculate free cash flow for the next five years Calculate free cash flow for the sixth year assuming a 4.5% growth rate Estimate the value of a share of Kandy Kanes' stock.

Depreciation
EBIT
Investment in Operating Assets
Kandy Kanes Co.
Free Cash Flow Forecast
2020
2021
2022
2023
2024
2025
83,492
493,294
38,592
483,195
37,502
28,957
39,572
293,602
936,823
283,957
93,028
39,820
29,348
29,838
27,562
Transcribed Image Text:Depreciation EBIT Investment in Operating Assets Kandy Kanes Co. Free Cash Flow Forecast 2020 2021 2022 2023 2024 2025 83,492 493,294 38,592 483,195 37,502 28,957 39,572 293,602 936,823 283,957 93,028 39,820 29,348 29,838 27,562
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