an Problem 8-10eBookYou are building a free cash flow to the firm model. You expect sales to grow from $2 billion for the year that just ended to $2.6 billion five years from now. Assume that the company will not become any more or lessefficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 4.887395 % for year 6 and onward after that. Use the following information to calculate the value of theequity on a per-share basis.a. Assume that the company currently has $600 million of net PP&E.b. The company currently has $200 million of net working capital.c. The company has operating margins of 12 percent and has an effective tax rate of 30 percent.d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt.e. The firm has 2 million shares outstanding.Do not round intermediate calculations. Round your answer to the nearest cent.DGrade it NowSave & ContinueContinue without saving

To calculate the value of equity on a per-share basis using the free cash flow to the firm (FCFF)…

Answered: Problem 8-10 eBook You are building a…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 25SP: Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site....

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Problem 8-10 You are building a free cash flow to the firm model. You expect sales to grow from $1.6 billion for the year that just ended to $2 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 4.063955% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $528 million of net PP&E. b. The company currently has $176 million of net working capital. c. The company has operating margins of 11 percent and has an effective tax rate of 30 percent. d. The company has a weighted average cost of capital of 10 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 1 million shares outstanding. Do not round intermediate calculations, Round your answer to the nearest cent. $
You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $1.15 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $300 million of net PP&E. b. The company currently has $100 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 28 percent. d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $
Question#01 Amazon Inc. is a fast-growing company. Analysts project the followingfree cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Amazon’s cost of capital is WACC = 13%. Time 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is Amazon’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyondYear 3 discounted back to Year 3.) What is the current value of operations for Amazon? Suppose Amazon has $10 million in marketable securities, $100 million in debt, and 10 millionshares of stock. What is the price per share?
Problem 5. Your firm is evaluating a project that should generate revenue of P4,600 in year one, P5,200 in year two, P5,900 in year three, and P5,700 in year four. The firm receives each cash flow at the end of each year. If your firm's required return is 12%, compounding semi-annually, what is the future value of these cash flows at the end of year four?
Problem 6. Justine Global Info Tech records the following cash flows at the end of each year for a project. If the firm's discount rate is 11%, what is the PRESENT VALUE of the project? Year Cash Flow 1 P794,633.00 2 P542,149.00 3 P836,200.00 4 P716,080.00 P520,354.00
Brook Corporation’s free cash flow for the current year (FCF0) was $3.00 million. Its investors require a 13% rate of return on (WACC = 13%). What is the estimated value of operations if investors expect FCF to grow at a constant annual rate of (1) −5%, (2) 0%, (3) 5%, or (4) 10%?
Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site. Selected data for the Derby Corporation are shown here. Use the data to answer the following questions. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Calculate the estimated Year-0 price per share of common equity.
8 A company expects a constant free cash flow of 240 mil per year forever. if the WACC is 12%, what is the value of operations?
You expect ATM Corporation to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($ millions) 75 84 96 111 120 Beginning with year six, you estimate that ATMʹs free cash flows will grow at 6% per year and that ATMʹs weighted average cost of capital is 15%. The enterprise value of ATM corporation is closest to: A. $1017.66 million B. $314.98 million C. $1413.33 million D. $702.67 million
● Q1.26 Construct a cash flow diagram that represents the amount of money that will be accumulated in 7 years from an initial investment of $20,000 now and $3,500 per year for 7 years at an interest rate of 8% per year.
Intro IBM is planning to produce an expert system based on artificial intelligence and expects the following cash flows (in $ million) at the end of each year: Year Cash flow 0 -49 1 10 2 15 3 20 4 20 30 The company requires a return of 12% from this project. Part 1 What is the project's profitability index? 2+ decimals Submit
Intro IBM is planning to produce an expert system based on artificial intelligence and expects the following cash flows (in $ million) at the end of each year: The company requires a return of 11% from this project. Year Cash flow 0 -43 1 10 15 20 30 Part 1 What is the project's profitability index? 2+ decimals Submit

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