14.46 Well-managed companies set aside money to pay foremergencies that inevitably arise in the course ofdoing business. A commercial solid-waste recyclingand disposal company in Mexico City puts 0.5% ofits after-tax income into such an account. (a) Howmuch will the company have after 7 years if after-taxincome averages $15.2 million and inflation andmarket interest rates are 5% per year and 9% peryear, respectively? (b) What will be the buyingpower of that amount in today's dollars?

Answered: its after-tax income into such an…

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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Today (n=0), a company invests $1,000 and expects that investment to grow 10% each period for the next six periods (n=6). What is the investment's expected future value?
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We are predicting for the end of this fiscal year: Skunk Products' EBIT is $1000, its tax rate is 35%, depreciation is $100, capital expenditures are $200, accounts receivable increase by $100, and accounts payable decrease by $100. What is the free cash flow to the firm? The FCFF will grow at 3%, WACC is 10%. What is the value of the company's assets? FCFF1 = $

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its after-tax income into such an account. (a) How much will the company have after 7 years if after-tax income averages $15.2 million and inflation and market interest rates are 5% per year and 9% per year, respectively? (b) What will be the buying power of that amount in today's dollars?