Woc inc. wants to increase its free cash flow by PIBO milion during the coming year, which shouldresult in a higher EVA and stock price. The CO has made these projections for the upcoming year:• CBIT Is projected to equal PRSO millon* Gross capital expenditures are enpected to total to P60 milien versus depreciation of P120millon, so its net capital expenditures should total P240 million.• The tan rate is 0N.• There will be no changes in cash or marketable securitien, nor willthere be any changes in notespayable or accrualswhat increase in net working capital in milions) would enable the firm ta meet its target increase inO P 72O P130O P156O P108O P 90

The difference between a company's current assets and current liabilities, such as cash, accounts…

Wec ine, wants to increase ts free cash low by PIB0 milion during the coming vear, which should resut in a higher EVA and stock price. The CHO Na made these p projections for the upceming year • caIT projected to equal PSOlon • Gross capital enpenditures are enpected to tutal to P0 milen versus depreciation of P120 millon, so its net capital ependitures should total P240 million. • The ta rate is 4 • There will be ne dhanges in cash or marketable securitien, ner wil there be any changes in notes payable or rals What increase in net working capital in miliens) woud enable the firm to meet target inereane in O P 72 O P130 O P156

Wec ine, wants to increase ts free cash low by PIB0 milion during the coming vear, which should resut in a higher EVA and stock price. The CHO Na made these p projections for the upceming year • caIT projected to equal PSOlon • Gross capital enpenditures are enpected to tutal to P0 milen versus depreciation of P120 millon, so its net capital ependitures should total P240 million. • The ta rate is 4 • There will be ne dhanges in cash or marketable securitien, ner wil there be any changes in notes payable or rals What increase in net working capital in miliens) woud enable the firm to meet target inereane in O P 72 O P130 O P156

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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Similar questions

Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be −$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? a. $167 b. $158 c. $193 d. $175 e. $18
When ∈=15% andMARR = 20% per year, determine whether the project (whose net cash-flow diagram appears next) is acceptable. Notice in this example that the use of an ∈% different from theMARR is illustrated. This might occur if, for some reason, part or all of the funds related to a project are “handled” outside the firm’s normal capital structure.
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year Cash Flow 0 $27,700 1 11,700 14,700 3 10,700 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR % Should the firm accept the project? Yes No
Suppose a company’s most recent free cash flow (i.e., FCF0)was $100 million and is expected to grow at a constant rate of 5percent. If the company’s weighted average cost of capital is 15percent, what is the current value from operations?
Consider the following project: Period Net cash flow 0 -100 1 0 2 78.55 3 78.55 The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) 1 Period 2 3 Change in value (economic depreciation) (20.00) 54.55 65.46 Expected economic income
Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions?
Assuming a 1-year, money market account investment at 2.51 percent (APY), a 1.1% inflation rate, a 25 percent marginal tax bracket, and a constant $40,000 balance, calculate the after-tax rate of return, the real return, and the total monetary return. What are the implications of this result for cash management decisions?
Pena Company is considering an investment of $30,455 that provides net cash flows of $9,400 annually for four years. (a) If Pena Company requires a 7% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) (b) Based on net present value, should Pena Company make this investment? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of this investment? Years 1-4 Net present value Net Cash Flows X PV Factor
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 –$ 148,000 1 64,000 2 75,000 3 59,000 a. At a required return of 12 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 21 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Dixon Sisters has a project with the after-tax cash flows shown below. The required return (cost of capital) on the investment is 10%. Compute the: Payback b. Discounted payback c. NPV d. Profitability index e. IRR MIRR YEAR 0 1 2 3 4 Cash flow −70,000 30,000 30,000 30,000 20,000
WhiteScreen LLC is evaluating Project T, which requires an initial investment of RO 18000. The expected net cash flows are RO 5000 pa for four years at today’s prices. However, these are expected to rise by 5.5% pa because of inflation. The firm’s cost of capital is 15%. What is the NPV for Project T being evaluated by WhiteScreen LLC using the discounting real cash flows? -1802 -2803 2500 14792
Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.

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