You are a research analyst for Bedrock Capital Management and are considering investing inEvergreen Landscaping, a chain of franchised landscaping businesses located in the Midwest. Nosales of PP&E have taken place this year. You are trying to build some cash flow numbers for thecalculation of Discounted Cash Flow valuation. The tax rate is 35%. There are no sales of PP&E inthe current year. Using the table below, what is the Free Cash Flow to the Firm (FCFF)?Cash FlowFromOperatingNet Income NADeprec &AmortAccountsReceivable871AccountsPayable-3,337Inventory -1189PrepaidExpenses042ST Notes 6Cash FlowfromInvestingCapex -Purch ofPP&ECash FlowfromFinancingRevolving-899 CreditFacilityDividendsPaidLong TermDebtIncomeStatement-152 Revenue-803Cost of GoodsSold329 Gross ProfitSalaries &BenefitsRentDepreciation &AmortizationInterestExpense91,24877,06714,1812,9391,608871532

Free cash flow is the net earnings plus the depreciation as cashflow considers only cash dealt items…

You are a research analyst for Bedrock Capital Management and are considering investing in Evergreen Landscaping, a chain of franchised landscaping businesses located in the Midwest. No sales of PP&E have taken place this year. You are trying to build some cash flow numbers for the calculation of Discounted Cash Flow valuation. The tax rate is 35%. There are no sales of PP&E in the current year. Using the table below, what is the Free Cash Flow to the Firm (FCFF)?

You are a research analyst for Bedrock Capital Management and are considering investing in Evergreen Landscaping, a chain of franchised landscaping businesses located in the Midwest. No sales of PP&E have taken place this year. You are trying to build some cash flow numbers for the calculation of Discounted Cash Flow valuation. The tax rate is 35%. There are no sales of PP&E in the current year. Using the table below, what is the Free Cash Flow to the Firm (FCFF)?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1hM

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

You are a research analyst for Bedrock Capital Management and are considering investing in
Evergreen Landscaping, a chain of franchised landscaping businesses located in the Midwest. No
sales of PP&E have taken place this year. You are trying to build some cash flow numbers for the
calculation of Discounted Cash Flow valuation. The tax rate is 35%. There are no sales of PP&E in
the current year. Using the table below, what is the Free Cash Flow to the Firm (FCFF)?
Cash Flow
From
Operating
Net Income NA
Deprec &
Amort
Accounts
Receivable
871
Accounts
Payable
-3,337
Inventory -1189
Prepaid
Expenses
0
42
ST Notes 6
Cash Flow
from
Investing
Capex -
Purch of
PP&E
Cash Flow
from
Financing
Revolving
-899 Credit
Facility
Dividends
Paid
Long Term
Debt
Income
Statement
-152 Revenue
-803
Cost of Goods
Sold
329 Gross Profit
Salaries &
Benefits
Rent
Depreciation &
Amortization
Interest
Expense
91,248
77,067
14,181
2,939
1,608
871
532

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