2-11Free Cash FlowFinancial information on Marine Tech Corporation is presented below. During the year,Marine Tech made a net investment in operating capital of $30 million. If the company'sshare price is $22, it has 10 million shares outstanding, and its tax rate is 30%, does MarineTech have sufficient free cash flow to repurchase 10% of its shares?Marine Tech Corporation Income StatementSalesOperating costsDepreciationEBITInterest expenseEarnings before taxTax (30%)Earnings after tax($ M)$3202202080107021$49 1. A company makes snowboards that retail at $1250. The company offers chained discounts of30% and 5% to its retailers.a. Calculate the price a retailer would pay for the snowboards.b. What single discount (single equivalent discount) is equivalent to these two discounts.C. What is the percent markup of the retailers.d. Due to a slowdown in sales the manufacturer would like to increase the total discountgiven to its retailers to 40%. What additional chained discount must they offer?

Free cash flow is calculated to measure the financial performance of a company. It is calculated by…

Answered: share price is $22, it has 10 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Meyer & Co. expects its EBIT to be $47,130 every year forever. The firm can borrow at 9 percent. Meyer currently has no debt, and the cost of assets is 12 percent, and the tax rate is 20 percent. The company borrows $180,000 and uses the proceeds to repurchase shares. What is the weighted average cost of capital?
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at r_{d} = 10% and its common stock currently pays a $3.00 dividend per share ( D_{0} = $3.00). The stock's price is currently \$ 20.75 , its dividend is expected to grow at a constant rate of 5% per year, its tax rate is 25%, and its WACC is 12.75%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. %?
Your company has expected future cash flows of $70 million in perpetuity. The company's WACC is 12.8%. The company has $337 million in debt, and $188 million in excess cash, and 12 million shares. What is the share price of the company?
You are given the following information for Lighting Power Company. Assume the company's tax rate is 25 percent. Debt: Common stock: 430,000 shares outstanding, selling for $61 per share; the beta is 1.12. 18,500 shares of 3.7 percent preferred stock outstanding, a $100 par value, currently selling for $82 per share. 6 percent market risk premium and 4.7 percent risk-free rate. What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) Preferred stock: Market: 10,000 5.9 percent coupon bonds outstanding. $1,000 par value, 25 years to maturity, selling for 107 percent of par; the bonds make semiannual payments. WACC %
Timco paid a $4 dividend last year. You think it will grow at 6% forever. Shareholders need to earn 15%. What is a fair price? Please show all work
Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 12%, and its common stock currently pays a $4.00 dividend per share (Do $4.00). The stock's price is currently $28.50, its dividend is expected to grow at a constant rate of 4% per year, its tax rate is 25%, and its WACC is 12.90%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places. % F
S Corp. is expected to pay a $2.55 dividend at year end, the dividend is expected to grow at a constant rate of 4.50% a year, and the common stock currently sells for $35 a share. The before-tax cost of debt is 5.50%, and the tax rate is 40%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s WACC? Do not round your intermediate calculations
For each office or business segment, indicate which type of Responsibility Center it is: a. A retail location, such as the Apple Store b. A manufacturing division that manages its own facilities and production equipment c. Call center for a warranty claims processing d. Consulting department of an accounting firm e. Quality control department for a golf ball manufacturer PreviousNext
The present value of JECK Co.’s expected free cash flows is $100 million. If JECK has $30 million in debt, $6 million in cash, and 2 million shares outstanding, what is its share price?
ETA is an all-equity firm with 50 million shares outstanding. It has $200 million in cash and expects future free cash flows of $80 million per year (with the next cash flow occurring in exactly one year's time). The Board of ETA can either use all excess cash to repurchase shares or for expansion. Suppose that ETA is able to invest the $200 million excess cash into a project that will increase the future free cash flows by 30% in year 1 (and cash flows stay constant at that level after year 1). This investment will not alter the risk of the business. ETA's cost of capital is 10% and assume that capital markets are perfect. If you were advising the board, what course of action would you recommend? Should ETA use the $200 million to expand or repurchase shares? Required: (a) Firm value with expansion is $ million. Note: Please provide your answer as an integer in million in the format of xxxx (for example, if the answer is $1,234.5 million, type in 1235). (b) If the board decides to…
A company just issued $453000 of perpetual 5% debt and used the proceeds to repurchase stock. The company expects to generate 107000 of EBIT in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm's unlevered cost of capital is 14% and the tax rate is 25%. Use APV method to calculate the value of the company with leverage. Your Answer: Answer
Start-Up Industries is a new firm that has raised $360 million by selling shares of stock.Management plans to earn a 20% rate of return on equity, which is more than the 15% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm. What will be Start-Up’s ratio of market value to book value? What will be Start-Up’s ratio of market value to book value if the firm can earn only a rate of return of 5% on its investments?

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS

share price is $22, it has 10 million shares outstanding, and its tax rate is 30%, does Marine Tech have sufficient free cash flow to repurchase 10% of its shares?