We find the following information on NPNG (No-Pain-No-Gain) Inc.: EBIT = $2,000,000 Depreciation = $250,000 Change in net wor
A4 9b
A4 9a
We find the following information on NPNG (No-Pain-No-Gain) Inc.:
EBIT = $2,000,000
Change in net
Net capital spending = $300,000
These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future:
EBIT: 20%
Depreciation: 10%
Change in net working capital: 15%
Net capital spending: 10%
The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%.
b. Calculate the CFA* for each of the next four years, using the formula
CFA* = EBIT(1 – T) + Depr – ΔNWC – NCS.
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