You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $1.15 billion five years from now. Assume that the company will not become anymore or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following informationto calculate the value of the equity on a per-share basis.a. Assume that the company currently has $300 million of net PP&E.b. The company currently has $100 million of net working capital.c. The company has operating margins of 12 percent and has an effective tax rate of 28 percent.d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt.e. The firm has 2 million shares outstanding.Do not round intermediate calculations. Round your answer to the nearest cent.$

Value per share refers to the price that is willing by the investors in the market to buy the shares…

Answered: You are building a free cash flow to…

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

A firm expects to make payments of 1.1, 1.5, 1.2, 1.4 and 1.9 million for a particular supply over each of the next 5 years. What constant annual payment is this equivalent to if the annual rate is 10%? That is, what is the time-value weighted average of this mixed-cash flow stream?
I think the payback periods are correct, I just need the different cash flows of each year + the final question at the bottom. Thank you.
HappyTunes Inc. forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 11.75%, the cost of equity is 19.25%, and the FCFs are expected to continue growing at a 5.25% rate after Year 5. Assuming that the ROIC is expected to remain constant in Year 5 and beyond, what is the Year O value of operations? Year: 1 2 3 4 5 Free cash flow: -$995 $15 $55 $80 $125 O-$310.32 million O $387.53 million O $139.31 million $445.46 million O-$176.72 milli
The table below gives the expected cash inflows of a firm for a period of 9 years. Time 3 6 9 Cash inflow (£) 45000 90000 120000 Assume the present value of the cash outflows is £87000, and the applicable cost of capital is 13%. Calculate the (a) Future value of the cash inflows (b) Modified internal rate of return (MIRR)
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
Use the ERR method with = 10% per year to solve for a unique rate of return for the following cashflow diagram. How many IRRS (the maximum) are suggested by Descartes' rule of signs? The ERR is%. (Round to two decimal places.) A maximum of $45 IRR value(s) is(are) suggested by the Descartes' rule of signs. $220 $350 Enf of Year $190 Q MARR = 10%/yr
We are predicting for the end of this fiscal year: Skunk Products' EBIT is $1000, its tax rate is 35%, depreciation is $100, capital expenditures are $200, accounts receivable increase by $100, and accounts payable decrease by $100. What is the free cash flow to the firm? The FCFF will grow at 3%, WACC is 10%. What is the value of the company's assets? FCFF1 = $
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Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$18 million, but its FCF at t = 2 will be $40 million. After Year 2, FCF is expected to grow at a constant rate of 5% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? Year: 1 2 Free cash flow: ($18) $40 (Round your answer to 2 decimal places.)
A firm is considering a new inventory system that will cost $120,000. The system is expected to generate positive cash flows over the next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000 in year 3, and $40,000 in year 4. The firm’s required rate of return is 9%. What is the payback period of this project? 1.95 years 2.46 years 2.99 years 3.10 years Based on the information from Question 47. What is the net present value (NPV) of the project? $28,830.29 $30,929.26 $36,931.43 $39,905.28 Based on the information from Question 47, what is the internal rate of return (IRR) of this project? 14.03% 17.56% 19.26% 21.78% Based on the information from Question 47, what is the profitability index (PI) of this project? 0.87 1.11 1.31 1.83.
3. You are considering an investment in a business with the following payoffs. You will generate an annual capital cash flow each year indefinitely with the following probability distribution: base case occurs with 50% probability where you earn $2 million; conservative case occurs with probability 30% where you will only earn a distribution with mean of $1 million; and an optimistic case otherwise where you believe you could as much as $5 million but just as likely could earn either $3 million or $4 million (all equally likely in this state). This investment will require an initial outlay of $15 million. Assume your cash flows occur at yearend. Also, the following financial data pertains to your firm: Required Return on Equity 12% Required Return on Debt 6% EPS $ 2 Net Income…
The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Year 1 $250,000 Annual Cash Flows Year 2 $20,000 Year 3 Year 4 $180,000 $450,000 Year 5 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?

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