You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $90 million, had a tax rate of 21 percent, and its depreciation expense was $10 million. Fields and Struthers's gross fixed assets increased by $56 million from last year to this year. The firm's current assets increased by $44 million and spontaneous current liabilities increased by $36 million.Calculate Fields and Struthers's NOPAT

You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $90 million, had a tax rate of 21 percent, and its depreciation expense was $10 million. Fields and Struthers's gross fixed assets increased by $56 million from last year to this year. The firm's current assets increased by $44 million and spontaneous current liabilities increased by $36 million.Calculate Fields and Struthers's NOPAT

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $62 million, had a tax rate of 21 percent, and its depreciation expense was $6 million. Fields and Struthers's gross fixed assets increased by $32 million from last year to this year. The firm's current assets increased by $24 million and spontaneous current liabilities increased by $14 million. Calculate Fields and Struthers's NOPAT. Note: Enter your answer in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) NOPAT million Calculate Fields and Struthers's operating cash flow. Note: Enter your answer in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) Operating cash flow million
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You have been asked to value Brilliant Enterprises, a publicly traded IT services firm, and have collected the following information: After-tax operating income last year = $100 million Net income last year = $82.5 million Book value of equity at start of this year = $750 million Book value of debt at start of this year = $250 million Capital expenditure last year = $80 million Depreciation last year = $30 million Increase in non-cash working capital last year = $10 million a) Assuming that Brilliant Enterprises will maintain its return on capital and reinvestment rate from last year for the next 3 years, estimate the free cash flow for the company for each of the next 3 years. b) After year 3, Brilliant expects its growth rate to decline to 3% and the return on capital to be 9% in perpetuity. Assuming that its cost of capital is 8%, estimate the terminal value at the end of the third year. c) Assuming that Brilliant has a cost of capital of 10% for the next 3…
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