FinCorp's free cash flow to the firm (FCFF) is reported as $200 million. The firm's interest expense is $25 million. Assume the tax rate is 35% and the net debt of the firm increases by $3 million. What is FinCorp's free cash flow to the equity (FCFE)? $185.75 million $186.75 million $187.75 million $188.75 million
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- The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?King Messi Corp. is expected to have $20 earnings before interest and taxes every year in perpetuity and a tax rate of 20%. The firm is financed with $100 in debt and the remainder with equity. The firm’s cost of debt is 5%. Its earnings after taxes are expected to be fully paid out as dividends. Based on this information, what is the total cash flow to debt and equity holders? Answers: 16 17 18 19 20Alpha Corporation has average annual free cashflows to the equity holder and to the firmof P3,000,000 and P3,350,000 respectively. Assuming that the weighted average cost ofcapital and actual return of on assets is 16.75% while the market return on Alpha's debt is7%, what is the value of its equity? a. P34,358,974.36 b.P15,000,000.00 c.P17,910,447.76 d.P20,000,000.00
- MedCorp's free cash flow to equity is P350 million and the firm's net debt increased by 20 million. It is reported that the firm's interest expense is P48 milion and it is assumed that its tax rate is 20%. The market capitalisation rate is 18% Calculate the Free Cash Flow to the Firm (FCFF) and market value of equity if its payout ratio is assumed to be 0.45 and the return on equity is 30 %? The weighted average cost of capital is estimated to be 18%. [Assume the free cash flow to equity grows indefinitely at the projected growth rate.FinCorp's free cash flow to the firm is reported as $235 million. The firm's interest expense is $28 million. Assume the corporate tax rate is 21% and the net debt of the firm increases by $3 million. What is the market value of equity if the FCFE is projected to grow at 3% indefinitely and the cost of equity is 12 % ? (Round your answer to 2 decimal places.)You are analysing NBM firm and obtained the following information: FCFF reported as R198 million, interest expense is R15 million. If the tax rate is 35% and the net debt of the firm increased by R20 million, what is the approximate market value of the firm if the FCFE grows at 3% and the cost of equity is 14%? R1,950 billion R2,497 billion R2,585 billion R3,098 billion R 1,893 billion
- FinCorp’s free cash flow to the firm is expected to be $50 million. The firm’s interest expense is $12 million. Assume the tax rate is 35% and the net debt of the firm remains the same. What is the market value of equity if the FCFE is projected to grow at 2% indefinitely and the cost of equity is 12.5%? Enter your answer in millions, rounded to one decimal place (e.g., 2.1 for $2.1 million).Lever Age pays an 10% rate of interest on $10.20 million of outstanding debt with face value $10.2 million. The firm's EBIT was $1.2 million. a. What is its times interest earned? (Round your answer to 2 decimal places.) > Answer is complete but not entirely correct. Times interest earned 0.01 X b. If depreciation is $220,000, what is its cash coverage ratio? (Round your answer to 2 decimal places.) > Answer is complete but not entirely correct. Cash coverage ratio 0.01 XA firm's net income is $36 million, depreciation is $3 million, its investments in fixed capital totals $13 million, its AFTER-TAX interest totals $4 million and its investment in working capital totals $5 million. The tax rate is 40%. What is its Free Cash Flow to the Firm? a.$27.00 million b. $25.00 million c. $23.40 million d. $25.40 million Give typing answer with explanation and conclusion
- How much will a firm need in cash flow before tax and interest to satisfy debtholders and equity holders if the tax rate is 21%, there is $10 million in common stock requiring a 12% return, and $6 million in bonds requiring an 8% return?Here is Icknield’s market-value balance sheet (figures in $ millions): Net working capital $550 Debt $800 long term assets $2,150 Equity $1,900 value of firm $2,700 $2,700 The debt is yielding 7%, and the cost of equity is 14%. The tax rate is 21%. Investors expect this level of debt to be permanent. a. What is Icknield’s WACC? b. How would the market-value balance sheet change if Icknield retired all its debt?Below is a firm's interest expenses in year 1, 2 and 3. After year 3, a firm's interest will grow at a constant rate of 4%. Firm's corporate tax rate is 40%. Firm's levered cost of equity is 10%, cost of debt is 2%. Firm is with 50% debt and 50% equity. What is the present value of interest tax shield using APV model? Interest Expense $79.09 million $61.35 million $68.12 million $73.02 million Year 1 $2 million Year 2 $3 million Year 3 $4 million
