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Introduction:
A company’s free each flow represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (Capital expenditures) and the payment of dividends. Having positive
In money related bookkeeping, a cash flow explanation, otherwise called the announcement of
To choose:
Compute free cash flow and the cash flow adequacy ratio.
Comment on Rollin’s ability to expand its operations.
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Chapter 11 Solutions
Cornerstones of Financial Accounting
- Apple Inc.’s 2021 Consolidated Financial Statements (FYE 9/25/21) reveal a $11,085,000,000 cash outflow for investments in fixed assets (purchases of property, plant and equipment). Assume the average useful life is five years and Apple Inc.’s minimum required rate of return is 12% in 2021 for these investments. Calculate the minimum average annual net cash inflow necessary for these investments to be acceptable. Using the average annual net cash inflows calculated in requirement 1 and the $11,085,000,000 cash outflow for investments, determine the payback period.arrow_forward(a) Assume JPM has a Liquidity Coverage Ratio of 112%. Assume JPM's High Quality Liquid Assets total $750 billion, what is JPM's 30-day net cash outflow? What is JPM's 30-day net cash outflow? (b) At year - end, 2022, JPM total assets $3, 665,743, 000, 000 ($3.665 trillion). What fraction of total assets are risk - weighted?arrow_forwardNeed help with this practice problem, please write clearly thank youarrow_forward
- What is the adjusted cash flow from asset in 2018? What is the predicted adjusted cash flow from asset in 2019?arrow_forwardDuring 2019, Bitsincoins Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, an increase in net current assets of $100,000, an increase in spontaneous current liabilities of $400,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, what is Bitsincoin’s free cash flow?arrow_forwardplease give me answer in relatablearrow_forward
- Cash Flow From AssetsIf your corporation's operating cash flow for 2020 is $7,300, net capital spending is $3,500, and your change in net working capital is $1,600, what is your 2020 cash flow from assets? Please show your formula and calculations in the space provided.arrow_forwardA firm with $1,000,000 in cash holdings and an annual CGS of $2,500,000 has targeted a DCH of 250 days for the next fiscal year. Assuming that CGS will remain unchanged in the upcoming year, what change in cash holdings would be required? A in cash holdings = $_arrow_forwardCarlsbad Corporation’s sales are expected to increase from $5 millionin 2018 to $6 million in 2019, or by 20%. Its assets totaled $3 million at the end of 2018.Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At theend of 2018, current liabilities are $1 million, consisting of $250,000 of accounts payable,$500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecastedto be 3%, and the forecasted retention ratio is 30%. Use the AFN equation to forecast theadditional funds Carlsbad will need for the coming year.arrow_forward
- Assume that today is December 31, 2018, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2019 is expected to be $500 million. The depreciation expense for 2019 is expected to be $180 million. The capital expenditures for 2019 are expected to be $400 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 6% per year. The required return on equity is 15%. The WACC is 10%. The firm has $200 million of non-operating assets. The market value of the company's debt is $3.096 billion. 340 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent. $arrow_forwardUse the following information for numbers 23 to 25: Corporate Valuators, Inc. is assessing the value of two companies, Capital Corp. and Earm, Inc. which projects the following net cash flows in the next five years, with its desired required rate of return. Net cash flows approximate to be its earnings also. The balance sheet of Capital Corp. and Eam, Inc. has recorded Property, Plant and Equipment of P100 million and P200 million, respectively. Operating assets are estimated at 80% and 70% respectively and the rest are considered idle. Capital Corp. 8,000,000 8,800,000 9,680,000 10,648,000 11,712,800 Required return 8% Net cash flows Net cash flows Earn, Inc. 9,600,000 10,560,000 11,616,000 12,777,000 14,055,3 6% Year 1 2 3 4 23. Using capitalization of earnings, compute for the equity value of Capital Corp. 24. Using capitalization of earnings, compute for the equity value of Eam, Inc. 25. Which company has higher equity value?arrow_forwardYou are considering an investment in Ray company, and want to evaluate the firm's free cash flow. From the income statement, you see that Ray company earned an EBIT of $62 million, had a tax rate of 21 percent, and its depreciation expense was $6 million. Ray's gross fixed assets increased by $32 million from 2020 and 2021. The firm's current assets increased by $24 million and spontaneous current liabilities increased by $14 million. Calculate Ray's operating cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.)arrow_forward
- Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
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