FinCorp's free cash flow to the firm (FCFF) is reported as $200 million. The firm's interestexpense is $25 million. Assume the tax rate is 35% and the net debt of the firm increases by$3 million. What is FinCorp's free cash flow to the equity (FCFE)?$185.75 million$186.75 million$187.75 million$188.75 million

FCFE is free cash flow for equity refers to the cash flow available for the equity holders or…

Answered: FinCorp's free cash flow to the firm…

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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Q. 16) Free Cash Inc. is expected to have free cash flow to equity next year (FCFE1) equal to $9 million as well as free cash flow to firm next year (FCFF1) equal to $12 million. The growth rate of both FCFE and FCFF is expected to be equal to 3% in perpetuity. The cost of equity for Free Cash Inc. is 18% while their after-tax cost of debt is equal to 8%. The debt-to-equity ratio (D/E) of Free Cash Inc. is equal to 1. What is the intrinsic value of Free Cash Inc.'s debt: Options - $100 million $37.50 million $16.67 million $60 million
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?
Check my work Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing 8 percent and is all tax deductible) and 560,000 shares of stock selling at $5.00 per share. To reduce the firm's risk associated with this financial leverage, the firm is considering reducing its debt by $1,000,000 by selling an additional 360,000 shares of stock. The firm's tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $866,000. Calculate the change in the firm's EPS from this change in capital structure. (Do not round intermediate calculations and round your final answers to 2 decimal places.) EPS before EPS after Difference
You are analysis Sasol stock and you have gathered the information in the table below. If the net debt of the firm increased by R20 million, what is the approximate FCFE? FCFF Interest after tax Tax rate FCFE growth Cost of equity R198m R15m 35% 3% 14% R1,950 R2,497 R203 R188.25 R208.25
criticism. structure? Explain M-M Theory with their 5 The Holland Company expects perpetual earnings before interest and taxes (EBIT) of $4 6 million per year. The firm's after-tax, all-equity discount rate (ro) is 15%. Holland is subject to a corporate tax rate of 35%. The pretax cost of the firm's debt capital is 10% per annum, and the firm has $10 million of debt in its capital structure. i. ii. iii. Question: 7 What is Holland's value? What is Holland's cost of equity (rs)? What is Holland's weighted average cost of capital (Twacc)?
Assume a firm has EBAT of $590,000, and no amortization. It is in a 40 percent tax bracket. a. Compute its cash flow. $ 354,000 b. Assume it has $590,000 in amortization. Recompute its cash flow. $ 590,000 c. How large a cash flow benefit did the amortization provide? $T] Cash flow Cash flow Benefit in cash flow
Assume that CVC Corp.'s marginal tax rate is 35%, investors in CVC pay a 15% tax rate on income from equity and a 35% tax rate on interest income. CVC is equally likely to have EBIT this coming year of $20 million, $25 million, or $30 million. What is the effective tax advantage of debt if CVC has interest expenses of $8 million this coming year?
Based on a discounted free cash flow method, you have estimated the value of a firm to be $270 million. The company has $110 million of long-term debt outstanding (common equity comprises the rest). There are 14.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?
What is Ningbo Shipping's WACC if it's after tax cost of retained earnings is 14%, and the firm's market value of debt is $40 million while the market value of it's equity is $60 million?

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