Ms. Ga Ling projected the following data for GWAPO Corporation: (amounts in millions of Pesos) Year Revenue Cash Operating Expenses 1 50.00 30.00 2 55.00 33.00 3 60.50 36.30 4 66.55 39.93 5 73.21 43.92 The company owns a property originally acquired at P50,000,000 with useful life of 10 years. The terminal value is assumed based on the growth rate of the cash flows. Annual capital investment required is P2,000,000. Outstanding loans is P16,620,000. Income tax rate is 30%. How much is the intrinsic value of GWAPO Corporation if the required return for this business is 12%?

Ms. Ga Ling projected the following data for GWAPO Corporation: (amounts in millions of Pesos) Year Revenue Cash Operating Expenses 1 50.00 30.00 2 55.00 33.00 3 60.50 36.30 4 66.55 39.93 5 73.21 43.92 The company owns a property originally acquired at P50,000,000 with useful life of 10 years. The terminal value is assumed based on the growth rate of the cash flows. Annual capital investment required is P2,000,000. Outstanding loans is P16,620,000. Income tax rate is 30%. How much is the intrinsic value of GWAPO Corporation if the required return for this business is 12%?

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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Blossom Company accumulates the following data concerning a proposed capital investment: cash cost $204,900, net annual cash flows $35,000, and present value factor of cash inflows for 10 years is 6.14 (rounded). (If the net present value is negative, use elther a negative sign preceding the number eg-45 or parentheses eg (45).) Determine the net present value, and indicate whether the investment should be made. Net present value $ The investment be made.
Assume Lasher’s Kitchen has pretax earnings of $150,000 after depreciation expense of $30,000. If the firm’s tax rate is 25 percent, what is its cash flow from operations? Round your answer to the nearest dollar. $
A machine costing P8,350 yields total cash flows of P13,100 over 5 years. The following pertains to the annual cash flows using the machine: Year Net cash inflows 1 P1,750 2 2,250 3 2,850 4 3,000 5 3,250 Compute for the company's payback reciprocal.
a) Compute Magna Corp's Free Cash Flow assuming the following: $400 million Operating income: Depreciation & amortization: Interest expense: Capital expenditures: $30 million $40 million 120% of depreciation & amortization Income tax rate: 35% Dividends: Increase in accounts receivable: Decrease in inventory: Decrease in accounts payable: $20 million $10 million $5 million $15 million b) Using a 2% perpetuity growth model and a WACC of 10%, what is the expected value of Magna Corp? Using the Dividend Discount Model and the same assumptions as in (b), c) propose a value for Magna Corp.
The following is a five-year discounted cash flow (DCF) forecast for Middlestates Electric, Inc., an electric utility company [Use spreadsheet Workbook Chapter 9 Problem 8]: ($ MM) Year 1 Year 2 Year 3 Year 4 Year 5 Operating income 2,039 2,325 2,169 2,430 2,615 Taxes 712 813 777 870 937 Depreciation and amortization 1,299 1,413 1,470 1,527 1,584 Change in working capital (169) 294 (223) 163 (205) Capital expenditures/asset sales (1,754) (3,432) 1,180 (2,720) (2,133) Free cash flow 703 (213) 3,819 530 924 Cash flows over the next five years are expected to fluctuate significantly due to key acquisitions and restructuring measures planned by Middlestates. After the fifth year, however, cash flow is expected to stabilize. Economists expect the long-term inflation rate to stabilize at 2.0 percent, and Middlestates expects real growth in sales to be 2.0 percent or less. Management has…
Calculate a firm's free cash flow if it has net operating profit after taxes of $60,000, depreciation expense of $10,000, net fixed asset investment requirement of $40,000, a net current asset requirement of $30,000 and a tax rate of 30%
7. A company that makes clutch disks had the cash flows shown below for one department with a MARR of 25%. Calculate the rate of return by using return on invested capital approach with a reinvestment rate of 15% per year. Should the company continue to make clutch disks? Year Cash Flow, $ Ft 1500 1 -1800 2 600 -570 3.
A machine costing P8,350 yields total cash flows of P.13,100 over 5 years. The following pertains to the annual cash flows using the machine: Year Net Cash inflows 1 P1,750 2 2,250 3 2,850 4 3,000 5 3,250 Compute for the company's payback reciprocal.
The Upfront Company has invested RM 123,000 on fully computerized equipment with an operation and maintenance cost of RM 7,800 per year, life span of five (5) years, and residual value of RM 9,000. The production has generated an income of RM 40,000 per year. Calculate the actual worth of the investment if the MARR is 12% per year. Illustrate with a proper cash flow diagram.
The West Mount Trading deposited yearly an amount of $5000 for 15 years. The accumulated amount was used to cover an emergency repair costing $100,000 in year 15. Draw the cash flow diagram. Calculate the rate of return of that this investment provided to the West Mount Trading.
Given the following data for Year 1: Earnings before Interest and Tax = $11 million; Interests = $3 million, Taxes = $2 million; Depreciation = $4 million; Investment in fixed assets = 5 million; Investment net working capital = $1 million. Calculate the free cash flow (FCF) for Year 1: Group of answer choices $8 million $9 million $6 million $7 million
A company is considering a $166,000 investment in machinery with the following net cash flows. The company requires a 10% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Net Cash Flow $10,000 $28,000 $55,000 $42,000 $111,000 (a) Compute the net present value of this investment.(b) Should the machinery be purchased?

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