A research analyst wants to use the discounted free cash flow model to determine the enterprise value of Machinex Ltd, a heavy machinery manufacturing company. The analyst has put together the following forecast of Machinex's income statement over the next three years (all figures in $ million): All figures in $ million Financial year ending 31 March 2024 2025 Revenue 180.0 Less: Operating expenses 120.0 Operating earnings before depreciation 60.0 Less: Depreciation 30.0 Earnings before interest and tax (EBIT) 30.0 5.0 25.0 7.0 18.0 Less: Interest expense Earnings before tax Less: Tax expense Net profit (earnings) 2026 200.0 240.0 128.0 145.0 72.0 95.0 25.0 20.0 47.0 75.0 5.0 5.0 42.0 70.0 11.8 19.6 30.2 50.4 In addition, the analyst has determined that: Operating working capital (OWC) in each year will be 15% of revenue in that year Capital expenditure (capex) will be $30 million in each year The corporate tax rate is 28%. . Machinex's free cash flow to the firm (FCF) in year 2026 is $ million. Note: Please provide your answer with two decimal points in $ million in the format of xx.xx (for example, if the answer is $12.34 million, type in 12.34).

A research analyst wants to use the discounted free cash flow model to determine the enterprise value of Machinex Ltd, a heavy machinery manufacturing company. The analyst has put together the following forecast of Machinex's income statement over the next three years (all figures in $ million): All figures in $ million Financial year ending 31 March 2024 2025 Revenue 180.0 Less: Operating expenses 120.0 Operating earnings before depreciation 60.0 Less: Depreciation 30.0 Earnings before interest and tax (EBIT) 30.0 5.0 25.0 7.0 18.0 Less: Interest expense Earnings before tax Less: Tax expense Net profit (earnings) 2026 200.0 240.0 128.0 145.0 72.0 95.0 25.0 20.0 47.0 75.0 5.0 5.0 42.0 70.0 11.8 19.6 30.2 50.4 In addition, the analyst has determined that: Operating working capital (OWC) in each year will be 15% of revenue in that year Capital expenditure (capex) will be $30 million in each year The corporate tax rate is 28%. . Machinex's free cash flow to the firm (FCF) in year 2026 is $ million. Note: Please provide your answer with two decimal points in $ million in the format of xx.xx (for example, if the answer is $12.34 million, type in 12.34).

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1. If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years? 2. If the investment is expected to earn increase revenue by P750,000 annually with cash savings on expenses of P120,000 each over its life, what is the accounting rate of return of this investment?
Find the profitability index (PI) for the following series of future cash flows, assuming the company’s cost of capital is 14.12 percent. The initial outlay is $418,044. Year 1: $164,390 Year 2: $152,563 Year 3: $195,331 Year 4: $199,028 Year 5: $175,965
The table below gives the expected cash inflows of a firm for a period of 9 years. Time 3 6 9 Cash inflow (£) 45000 90000 120000 Assume the present value of the cash outflows is £87000, and the applicable cost of capital is 13%. Calculate the (a) Future value of the cash inflows (b) Modified internal rate of return (MIRR)
As a financial analyst, you have been tasked with evaluating Randy Watson Music's free cash flow. Based on the 2022 income statement, BIT was $41 million, the tax rate was 21 percent, and its depreciation expense was $6 million. NOPAT gross fixed assets increased by $28 million from 2021 and 2022. The company's current assets increased by $18 million and current liabilities increased by $14 million. Calculate the Investment in operating capital (IOC) for 2022.
Suppose an investment has conventional cash flows with positive NPV. How would it impact your decision based on capital budgeting techniques mentioned below? Proﬁtability index (PI) Internal Rate of Return (IRR) Payback Period (PBP) Ratio 2020 2019 2018 2020- Industry Average Inventory Turnover 62.65 42.42 32.25 53.25 Receivables in days 94 63 50 115 Debt to Equity 0.75 0.85 0.90 0.88 Quick Ratio 1.028 1.03 1.029 1.031 Current Ratio 1.33 1.21 1.15 1.25
Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2? a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ $ SA $ 69 $ GA 67 69 $ $ $ 6969 $ $ SA
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $64 million, had a tax rate of 21 percent, and its depreciation expense was $5 million. Fields and Struthers's NOPAT gross fixed assets increased by $30 million from 2020 and 2021. The firm's current assets increased by $26 million and spontaneous current liabilities increased by $15 million. Calculate Fields and Struthers's NOPAT operating cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.) Operating cash flow Calculate Fields and Struthers's NOPAT investment in operating capital for 2021. (Enter your answer in millions of dollars.) Investment in operating capital million Free cash flow Check my work million million Calculate Fields and Struthers's NOPAT free cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.)
Consider the following data (be careful there might be some "unnecessary" information). EBIT = 176 Interest expense = 10 Tax rate = 30% Depreciation = 38 Net working capital = 30 Increase in net working capital = 10 Beginning of period Net PP&E = 50 Capex = 16 What is the free cash flow of the firm that year?
Find the present value of the following stream of a firm's cash flows, assuming that the firm's opportunity cost is 8%. End of year Cash flow 1 2 3 $5,000 $25,000 $14,000
The following is a four-year forecast for Torino Marine. Year Free cash flow ($ millions) 2022 -63 a. Fair market value b. Fair market value per share 2023 84 2024 101 a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine's weighted-average cost of capital is 9 percent and its tax rate is 20 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. million 2025 123 b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 48 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $380 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
As a financial analyst, you have been tasked with evaluating Randy Watson Music's free cash flow. Based on the 2022 income statement, EBIT was $41 million, the tax rate was 21 percent, and its depreciation expense was $6 million. NOPAT gross fixed assets increased by $28 million from 2021 and 2022. The company's current assets increased by $18 million and current liabilities increased by $14 million. Calculate the operating cash flow (OCF) for 2022. (Enter your answer in millions of dollars.)
The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now. (Click here to access the PV and FV tables to use with this problem.) Required: Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually. Round your answer to two decimal places. $

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