Today is December 31, 2018. The following information applies to Addison Airlines:After-tax, operating income for the year 2019 is expected to be P400 million.The company's depreciation expense for the year 2019 is expected to be P80million.The company's capital expenditures for the year 2019 are expected to be P160million.No change is expected in the company's net operating working capital.The company's free cash flow is expected to grow at a constant rate of 5 percentper year.The company's cost of equity is 14 percent.The company's WACC is 10 percent.The current market value of the company's debt is P1.4 billion.The company currently has 125 million shares of stock outstanding.Using the free cash flow valuation method, what should be the company's stock pricetoday?O P25O P40O P50O P85

In order to determine the company stock price, the value of the debt is required to be deducted from…

Answered: Today is December 31, 2018. The…

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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The 2021 income statement for Duffy's Pest Control shows that depreciation expense was $203 million, EBIT was $516 million, and the tax rate was 35 percent. At the beginning of the year, the balance of gross fixed assets was $1,586 million and net operating working capital was $423 million. At the end of the year, gross fixed assets was $1,839 million. Duffy's free cash flow for the year was $429 million. Calculate the end-of-year balance for net operating working capital. (Enter your answer in millions of dollars rounded to 1 decimal place.) Net operating working capital million
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $64 million, had a tax rate of 21 percent, and its depreciation expense was $5 million. Fields and Struthers's NOPAT gross fixed assets increased by $30 million from 2020 and 2021. The firm's current assets increased by $26 million and spontaneous current liabilities increased by $15 million. Calculate Fields and Struthers's NOPAT operating cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.) Operating cash flow Calculate Fields and Struthers's NOPAT investment in operating capital for 2021. (Enter your answer in millions of dollars.) Investment in operating capital million Free cash flow Check my work million million Calculate Fields and Struthers's NOPAT free cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.)
The annual report of 2019 which shows an EBITDA of P5,000,000 and a total liability of P15,550,000. Evidently, the sales grew by 12% annually with a direct effect on the growth of free cash flow of 12% yearly. Last year, the free cash flow was reported to be P3,500,000. The weighted average cost of capital is 10%. Using the financial model, how much is the value of the equity?
In 2021, PacMan Inc. had a net operating profit after-taxes of P20,000,000 and an effective tax rate of 20%. Its earnings before interest, taxes, depreciation and amortization was P45,500,000 and net income of P12,200,000. During 2022, PacMan Inc. made P14,500,000 capital expenditures net of depreciation. Determine the total depreciation and amortization expense of PacMan Inc.
For 2020, Electro Tech Inc. has reported earnings before interest and taxes (ebit) of $6.5 million; capital expenditures of $1.2 million; and depreciation of $0.7 million. Net working capital for 2020 is $1.0 million and for 2019 is $0.7 million. The tax rate for Electro Tech is 35%. Calculate Electro Tech’s free cash flow
The following is a four-year forecast for Torino Marine. Year Free cash flow ($ millions) 2022 -63 a. Fair market value b. Fair market value per share 2023 84 2024 101 a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine's weighted-average cost of capital is 9 percent and its tax rate is 20 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. million 2025 123 b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 48 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $380 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
For 2020, Electro Tech Inc. has reported earnings before interest and taxes (ebit) of $6.5 million; capital expenditures of $1.2 million; and depreciation of $0.7 million. Net working capital for 2020 is $1.0 million and for 2019 is $0.7 million. The tax rate for Electro Tech is 35%. Calculate Electro Tech's free cash flow. 18.
Long-Term Financing Needed At year-end 2021, Wallace Landscaping's total assets, all of which are used in operations, were $2.34 million, and its accounts payable were $495,000. Sales, which in 2021 were $2.8 million, are expected to increase by 30% in 2022. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $590,000 in 2021, and retained earnings were $245,000. Wallace has arranged to sell $155,000 of new common stock in 2022 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2022. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 3%, and 40% of earnings will be paid out as dividends. a. What was Wallace's total long-term debt in 2021? Do not round…
Broussard Skateboard's sales are expected to increase by 20% from $8.4 million in 2019 to $10.08 million in 2020. Its assets totaled $5 million at the end of 2019. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2019, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 55%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar. $
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A corporation has $50 billion of Earnings Before Interest and Taxes (EBIT) and $20 billion in interest expenses this year. How much interest expense can the company deduct from its EBIT in the current year? What happens if the company can’t deduct all of its interest expenses in the current year?
Maggie's Muffins Bakery generated $2 million in sales during 2021, and its year-end operating assets were $1.7 million. Also, at year-end 2021, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2022, the company estimates that its operating assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 5%, and its payout ratio will be 60%. How large a sales increase can the company achieve without having to raise funds externally-that is, what is its self-supporting growth rate? Do not round intermediate calculations. Enter your answer for sales increase in dollars. For example, an answer of $2 million should be entered as 2,000,000. Round the monetary value to the nearest dollar and percentage value to one decimal place. Sales can increase by $ 222222 that is by 11.11 %.

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