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on the next digit. Say s- 8678.4546 When you round it to the nearest hundredth digit, you get a8678. Say z-8678.4556 When you round it to the nearest hundredth digit, you get z-8678. Questionl: You are given the following information about a corporation. Statement income 2019 2020 Sales 300 250 180 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 200 45 50 20 25 45 50

on the next digit. Say s- 8678.4546 When you round it to the nearest hundredth digit, you get a8678. Say z-8678.4556 When you round it to the nearest hundredth digit, you get z-8678. Questionl: You are given the following information about a corporation. Statement income 2019 2020 Sales 300 250 180 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 200 45 50 20 25 45 50

Quickbooks Online Accounting
Quickbooks Online Accounting
3rd Edition
ISBN:9780357391693
Author:Owen
Publisher:Owen
Chapter6: Investing And Financing Activities
Section: Chapter Questions
Problem 2.4C
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KINGDOM OF SAUDI ARABLA MINISTRY OF HIGHER EDUCATION 4 Imam Muhammad thn Sand hlamie Universio College of Ecenomies and Adminirative Selenees Department of inance and Investment Acedemic year1442-144 Level i four Caurne Princiuler af finance and investment-FINI02 Home exercises 1 All results must be numerie and rounded to the nearest hundredth When you round off to the hundredih digit, you look at only the thousandth digit Le you focus only on the next digit. Say x- 8678.4546 When you round it to the nearest hundredth digit, you get - 8678.45 Say z= 8678.4556 When you round it to the nearest hundredth digit. you get z 8678.46 Question1: You are given the following information about a corporation. Statement income 2019 2020 Sales 250 300 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 180 200 45 20 50 25 45 50 Question2: You are considering an investment in a new project. You anticipate additional carnings before depreciation, interest and taxes (EBDIT) of $100,000 for the first year of operation of the project in 2018, and, over the next five years, the firm estimates that this amount will grow at a rate of 5% per year. The project will require an initial investment of $400,000 that will be depreciated over a five-year period towards a zero-salvage value using straight-line depreciation. You estimate that this new project will need net working capital equals to $20,000 at the start of the project and after that it will be calculated on the basis of 20% of EBDIT each year. Cash requirements of net working capital are retrieved at the end of the project (at the end of the fifth year). If we assume the firm faces a 30% tax rate, calculate the project's annual free cash flow (FCF) for cach of the next five years. Note: To solve these questions you can use a table and doing the following formulae: v Earnings Before Depreciation, Interests and Taxes EBDIT: EBDIT = Sales Revenues - Operating Costs v Earnings Before ,Interests and Taxes EBIT: EBIT EBDIT- Depreciation V Net Income NI: NI = EBIT - Taxes v Operating Cash Flow OCF: OCF = Sales Revenues- Operating Costs - Taxes OCF = EBDIT*(1-T ) +T *D • OCF = EBIT*(1-r)+ D OCF = NI + Interests*(1-r) + D v Changes in Net Working Capital ANWC-NWC+1-NWC %3D v Free Cash Flow FCF OCF-ANWC - Capital Spending
Transcribed Image Text:KINGDOM OF SAUDI ARABLA MINISTRY OF HIGHER EDUCATION 4 Imam Muhammad thn Sand hlamie Universio College of Ecenomies and Adminirative Selenees Department of inance and Investment Acedemic year1442-144 Level i four Caurne Princiuler af finance and investment-FINI02 Home exercises 1 All results must be numerie and rounded to the nearest hundredth When you round off to the hundredih digit, you look at only the thousandth digit Le you focus only on the next digit. Say x- 8678.4546 When you round it to the nearest hundredth digit, you get - 8678.45 Say z= 8678.4556 When you round it to the nearest hundredth digit. you get z 8678.46 Question1: You are given the following information about a corporation. Statement income 2019 2020 Sales 250 300 Operating costs Depreciations Net Working Capital Capital Spending If we assume the firm faces a 20% tax rate, calculate the free cash flow (FCF) for the year 2020. 180 200 45 20 50 25 45 50 Question2: You are considering an investment in a new project. You anticipate additional carnings before depreciation, interest and taxes (EBDIT) of $100,000 for the first year of operation of the project in 2018, and, over the next five years, the firm estimates that this amount will grow at a rate of 5% per year. The project will require an initial investment of $400,000 that will be depreciated over a five-year period towards a zero-salvage value using straight-line depreciation. You estimate that this new project will need net working capital equals to $20,000 at the start of the project and after that it will be calculated on the basis of 20% of EBDIT each year. Cash requirements of net working capital are retrieved at the end of the project (at the end of the fifth year). If we assume the firm faces a 30% tax rate, calculate the project's annual free cash flow (FCF) for cach of the next five years. Note: To solve these questions you can use a table and doing the following formulae: v Earnings Before Depreciation, Interests and Taxes EBDIT: EBDIT = Sales Revenues - Operating Costs v Earnings Before ,Interests and Taxes EBIT: EBIT EBDIT- Depreciation V Net Income NI: NI = EBIT - Taxes v Operating Cash Flow OCF: OCF = Sales Revenues- Operating Costs - Taxes OCF = EBDIT*(1-T ) +T *D • OCF = EBIT*(1-r)+ D OCF = NI + Interests*(1-r) + D v Changes in Net Working Capital ANWC-NWC+1-NWC %3D v Free Cash Flow FCF OCF-ANWC - Capital Spending
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