We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales,*((1-c-d)(1-p)-s/(1+s)*n).

We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales,((1-c-d)(1-p)-s/(1+s)n).

College Algebra

1st Edition

ISBN:9781938168383

Author:Jay Abramson

Publisher:Jay Abramson

Chapter6: Exponential And Logarithmic Functions

Section6.1: Exponential Functions

Problem 3SE: The Oxford Dictionary defines the word nominal asa value that is “stated or expressed but...

See similar textbooks