KINGDOM OF SAUDI ARABLAMINISTRY OF HIGHER EDUCATION4 Imam Muhammad thn Sand hlamie UniversioCollege of Ecenomies and Adminirative SeleneesDepartment of inance and InvestmentAcedemic year1442-144Level i fourCaurne Princiuler af financeand investment-FINI02Home exercises 1All results must be numerie and rounded to the nearest hundredthWhen you round off to the hundredih digit, you look at only the thousandth digit Le you focus onlyon the next digit.Say x- 8678.4546 When you round it to the nearest hundredth digit, you get - 8678.45Say z= 8678.4556 When you round it to the nearest hundredth digit. you get z 8678.46Question1:You are given the following information about a corporation.Statement income20192020Sales250300Operating costsDepreciationsNet Working CapitalCapital SpendingIf we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020.180200452050254550Question2:You are considering an investment in a new project. You anticipate additional carnings before depreciation, interest andtaxes (EBDIT) of $100,000 for the first year of operation of the project in 2018, and, over the next five years, the firmestimates that this amount will grow at a rate of 5% per year. The project will require an initial investment of $400,000that will be depreciated over a five-year period towards a zero-salvage value using straight-line depreciation. Youestimate that this new project will need net working capital equals to $20,000 at the start of the project and after that itwill be calculated on the basis of 20% of EBDIT each year. Cash requirements of net working capital are retrieved atthe end of the project (at the end of the fifth year).If we assume the firm faces a 30% tax rate, calculate the project's annual free cash flow (FCF) for cach of the next fiveyears.Note: To solve these questions you can use a table and doing the following formulae:v Earnings Before Depreciation, Interests and Taxes EBDIT:EBDIT = Sales Revenues - Operating Costsv Earnings Before ,Interests and Taxes EBIT:EBIT EBDIT- DepreciationV Net Income NI:NI = EBIT - Taxesv Operating Cash Flow OCF:OCF = Sales Revenues- Operating Costs - TaxesOCF = EBDIT*(1-T ) +T *D• OCF = EBIT*(1-r)+ DOCF = NI + Interests*(1-r) + Dv Changes in Net Working CapitalANWC-NWC+1-NWC%3Dv Free Cash FlowFCF OCF-ANWC - Capital Spending

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on the next digit. Say s- 8678.4546 When you round it to the nearest hundredth digit, you get a8678. Say z-8678.4556 When you round it to the nearest hundredth digit, you get z-8678. Questionl: You are given the following information about a corporation. Statement income 2019 2020 Sales 300 250 180 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 200 45 50 20 25 45 50

on the next digit. Say s- 8678.4546 When you round it to the nearest hundredth digit, you get a8678. Say z-8678.4556 When you round it to the nearest hundredth digit, you get z-8678. Questionl: You are given the following information about a corporation. Statement income 2019 2020 Sales 300 250 180 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 200 45 50 20 25 45 50

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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