WoC Inc. wants to increase its free cash flow by P180 million during the coming year, which shouldresult in a higher EVA and stock price. The CFO has made these projections for the upcoming year:* EBIT is projected to equal P850 million.* Gross capital expenditures are expected to total to P360 million versus depreciation of P120million, so its net capital expenditures should total P240 million.* The tax rate is 40%.* There will be no changes in cash or marketable securities, nor will there be any changes in notespayable or accruals.What increase in net working capital (in millions) would enable the firm to meet its target increase inFCF?

Increase in working capital is required to meet the targeted the free cash flow so company needs to…

* EBIT is projected to equal P850 million. * Gross capital expenditures are expected to total to P360 million versus depreciat million, so its net capital expenditures should total P240 million. The tax rate is 40%. * There will be no changes in cash or marketable securities, nor will there be any o payable or accruals. hat increase in net working capital (in millions) would enable the firm to meet its targe

* EBIT is projected to equal P850 million. * Gross capital expenditures are expected to total to P360 million versus depreciat million, so its net capital expenditures should total P240 million. The tax rate is 40%. * There will be no changes in cash or marketable securities, nor will there be any o payable or accruals. hat increase in net working capital (in millions) would enable the firm to meet its targe

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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Similar questions

Consider an infinitely lived pure-equity firm (no debt). Every year the firm has revenueof £7,000 and a total cost of £6,000 (variable plus fixed costs). It faces a corporate taxrate of 40% and invests every year £300 into a new project. The investment is writtenoff linearly over 10 years (yearly depreciation is £30). The market interest rate is 10%.(a) What is the value of the firm (NPV) on the market? b) Now suppose the corporate tax rate were cut to 30%. All other things equal, whatwould now be the new value of the firm?
8. CB Corp. is expected to generate net income of $40 million next year and will pay $20 million in after-tax interest expense next year. The company is expected to reinvest 20% of its after-tax operating earnings and will have return on capital (ROC) equal to 10% in perpetuity. If the weighted-average cost of capital for CB Corp. is 10% what is today's present value of the firm equal to? (a) $60 million. (b) $120 million. (c) $150 million. (d) $600 million.
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
Suppose a company’s most recent free cash flow (i.e., FCF0)was $100 million and is expected to grow at a constant rate of 5percent. If the company’s weighted average cost of capital is 15percent, what is the current value from operations?
) Suppose a company’s current free cash flow (i.e. FCF0) is $100 million and is expected to grow at a constant rate of 5 percent. If the company’s overall cost of capital is 15 percent, what is the current value of operations? $ 913 million $1,000 million $1,050 million $1,500 million $2,000 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.)
Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$18 million, but its FCF at t = 2 will be $40 million. After Year 2, FCF is expected to grow at a constant rate of 5% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? Year: 1 2 Free cash flow: ($18) $40 (Round your answer to 2 decimal places.)
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $183,000 per year. The cost of equity is 13.1 percent and the tax rate is 21 percent. The firm can borrow perpetual debt at 6.3 percent. Currently, the firm is considering converting to a debt–equity ratio of .93. What is the firm's levered value? MM assumptions hold. A. $829,786 B. $1,215,262 C. $1,155,579 D. $997,511 E. $921,985
Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.
Current and projected free cash flows for Radell Global Operations are shown below (in $ millions): Growth is expected to be constant after 2021, and the weighted average cost of capital is 10.7%. What is the horizon (continuing) value at 2022 if growth from 2021 remains constant? Do not round intermediate calculations. Enter your answer in millions, WITHOUT comma or separator. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.
You are making a proposal to start a corporation that would require invested capital of P9,000,000 but will provide annual earnings of P1,500,000 every year. The capital will be from an 8%- interest, P2,500,000-face value perpetual bonds and the balance from equity requiring a rate of return of 15%. How much is the value of goodwill based on this forecast?
Suppose today is January 1, 2022. You wish to value the shares of Terrapin Industries, a private firm with 100 million outstanding shares, $300M in debt, and $25M in excess cash. The company has a tax rate of 30%. You expect the company’s Sales to equal $300 million in 2022, and to grow at 10% per year through 2025. The company’s EBIT margin (i.e., EBIT as a % of sales) is expected to be 10%, while Net Working Capital is expected to equal 20% of (same year) sales. The balance sheet amount of Net Working Capital at the end of 2021 was $55 million. You expect that the company’s Net PP&E will remain constant from now through 2025 (i.e., capital expenditures will equal depreciation each year). After 2025, free cash flows are projected to grow at a constant 2% rate forever. You expect Terrapin to maintain a 50% D/V ratio in the future. Given this, you have estimated the beta of Terrapin’s equity (Be) at 1.1 and the beta of its debt (Bd) at 0.3. The current long-term risk-free rate is…

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