You are building a free cash flow to the firm model. You expect sales to grow from $2 billion for the year that just ended to $2.2 billion five years from now.Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, andthen at a constant rate of 1.424488% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-sharebasis.a. Assume that the company currently has $660 million of net PP&E.b. The company currently has $220 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 10 percent. This is based on a capital structure of two-thirds equity and one-third debt.e. The firm has 2 million shares outstanding.ADo not round intermediate calculations. Round your answer to the nearest cent

The operating margin is the profit earned by the company after its accounts for all the operating…

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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Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,950,000 and will last 10 years. b. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $280,000. She estimates that the return from owning her own shop will be $45,000 per year. She estimates that the shop will have a useful life of 6 years. c. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a…
The manager of a production system expects to spend S100,000 the first year with amounts increasing by $10,000 each year. Income is expected to be $400,000 the first year, decreasing by $50,000 each year. a) Draw cash flow diagrams of expenditures and income separately over an 8 year period at an interest rate of 12% per year. b) Detemine the present worth of the company's net cash flow (present worth = present income present expenditure). Please write fomula and show your solution step by step. Use compound interest tables.
An investment is expected to generate annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate annually. We know that the cash flow expected in 1 years from today is expected to be $50.00 and the cash flow expected in 4 years from today is expected to be $55.64. What is the cash flow expected to be in 3 years from today?(Round the value to 100th decimal)
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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?
1. If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years? 2. If the investment is expected to earn increase revenue by P750,000 annually with cash savings on expenses of P120,000 each over its life, what is the accounting rate of return of this investment?
Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 14.5%. The study period needs to be exactly 8 years and each year should have at least one unique cash flow that is different from the cash flows over the other years. Your answer should contain a table showing the cash flows for each year and a graphical representation of the cash flows (cash-flow diagram).
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)
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
Calculate on Excel. And provide formula

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