Suppose you have a firm with investor-supplied capital of $30 million. Further suppose that the WACC of the firm is 9%, and you are given the following income statement of the firm. Show work for all parts requiring computation. sales 26 M operating cost 16 m interest expense 3m Taxes (44%) What is the net income of the firm?
Q: Stay Swift Corp. has an expected net operating profit after taxes, EBIT(1 T), of $14,700 million in…
A: Hi student Since there are multiple questions, we will answer only first question. Free cash flows…
Q: The value of a firm is estimated to be $10 million. Next year’s cash flow is expected to be $1…
A: The formula used is shown:
Q: You are analyzing the cost of capital for a firm that is financed with $300 million of equity and…
A: The overall cost of capital refers to the average cost that is paid by a company to raise the fund…
Q: Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as…
A: WACC is the weighted average cost of capital. It is the overall cost of capital which is used for…
Q: The EBIT of a firm is $300, the tax rate is 35%, the depreciation is $20, capital expenditures are…
A: Free Cash Flow: The free cash flow represents the cash generated by the business after accounting…
Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…
A: Earnings before interest and taxes: Earnings before interest, depreciation and taxes are the…
Q: What is the overall (weighted average) cost of capital in the following situation? The firm has $10…
A: Here, Long Term Debt (D) is $10,000,000 Preferred Stock (P) is $2,000,000 Common Equity (E) is…
Q: Fast Securities Ltd is looking into an investment of $100,000. The investment is expected to…
A: Economic value added (EVA) is a measure of a company's financial performance based on the residual…
Q: An investor is considering investing in one of two firms (C and D). The WACC is 12% and the…
A: C firm is stronger compared to firm D.
Q: The net income is RO 20 million. Last year's sales were RO 180 million. The total assets represent…
A: External Financing needed = (Assets/Sales) x (Δ Sales) - (Spon lIab/Sales ) x (Δ Sales) - (PM x FS)…
Q: It is known that a firm’s Net Operating Profit After Tax (NOPAT) is $58,000 and its Economic Value…
A: We need to use EVA equation below to calculate WACC EVA =Net Operating Profit After Tax (NOPAT)…
Q: A firm has EBIT of $7.5 million, a 33% tax rate, a weighted average cost of capital of 8.95% and…
A: EBIT = $7.5 MillionTax Rate = 33%Weighted Average Cost of Capital (WACC) = 8.95%Total Capital = $55…
Q: Petra plc. has a current and target leverage ratio of 0.8, the finance cost from loans is 16 per…
A: Weighted cost of capital: It can be defined as the rate that is paid by the company on the average…
Q: You are analysing NBM firm and obtained the following information: FCFF reported as R198 million,…
A: FCFE is the free cash flow to the equity The formula for the same: FCFE = FCFF - Interest (1-tax…
Q: compute the weighted average cost of capital.
A: Debt to Equity Ratio of 1 implies that Debt Ratio = 1/2 = 0.5 Equity Ratio = 1/2 = 0.5 Cost of Debt…
Q: Calculate the ROI and calculate the Economic Profit.
A: Return on investment can be calculated with the formula ROI = Net IncomeInvestment=16,000100,000=…
Q: TechnoLink Berhad is currently an unlevered firm with a weighted average cost of capital (WACC) of…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: what is the value of the firm?
A: Free cash flow refers to the cash flow generated by the company in the year from its operations…
Q: Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of…
A: A levered firm is one which has debt and an unlevered firm is one which has no debt. We will use the…
Q: The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the…
A: Value of Unlevered firm (Vu)Vu=EBIT1-TRu where T= Tax rate, Ru=Unlevered cost of capital Value of…
Q: National Co. has a constant growth rate of 5%. The company pays out 70% of its earnings. National…
A: An optimal capital structure is an efficient and appropriate mix of debt and equity so that…
Q: The ABC corp. is expected to have the earnings before interest and taxes of $60,000 and the…
A: As per MM proportion 2 value of unlevered firm will increase by present value of tax shield provided…
Q: The firm is financed with debt and equity. The book value of the debt is $10,000,000; the book value…
A: Weighted average cost of capital (WACC) refers to the average cost that is paid by a company to…
Q: A firm has total assets of $1,000,000 and a debt ratio of 30 percent. Currently, it has sales of…
A: Return on equity (ROE):It is a profitability measure that is related with the firm's equity. It is…
Q: The firm has a net income of $2.3 million. The firm's capital structure consists of Equity of $15…
A: Given information: Net income is $2.3 million Equity is $15 million, Debt is $10 million Company…
Q: An A firm has sales of $10 million, variable costs of $4 million, fixed expenses of $1.5 million,…
A: formula for DOL, DFL and DCL DOL=contibutionEBIT=sales - variable costsales - variable cost - fixed…
Q: A firm has total interest charges of $10,000 per year, sales of $1 million, a tax rate of 40…
A: Solution: The times interest earned ration is a measure to determine company's ability to meet its…
Q: Zumbahlen Inc. has the following balance sheet information. How much total operating capital does…
A: Operating capital: It is the computation of the company’s liquidity position.
Q: The Glexon mill has total assets of $91,600, current liabilities of $9,700, dividends paid of…
A: Particulars Total Assets (A) $ 91,600 Current liabilities (L) $ 9,700 Sales (S0) $ 38,400…
Q: The free cash flow to the firm is reported as $198 million. The interest expense to the firm is $15…
A: Free Cash Flows for Equity = Free Cash Flows of the Firm + Debt - (Interest*(1-tax)) Free Cash Flows…
Q: A firm has an net operating profit of P300,000, interest of P35,000, and a tax rate of 25%. The firm…
A: WACC = (Ke*Wk) + (Kd*(1-t)*Wd) Where Ke = Cost of equity Kd = Cost of debt Wk = weight of equity…
Q: Calculate the degree of financial leverage for a firm with EBIT of $6,000,000, fixed cost of…
A: The degree of financial leverage shows the potential impact of change in operating income that is…
Q: The free cash flow to the firm is reported as $300 million. The interest expense to the firm is $30…
A: Information povided
Q: No.7 can maximize the market value of the firm as per Walter's model Accordingly, each year at…
A: Dividend payout is the ratio which defines the capacity of the company in paying off its…
Q: A company has sales of $200 million, NOPAT of $12 million, netincome of $8 million, net operating…
A: Given information: Sales amounted to $200 million, NOPAT of $12 million, Net income of $8 million,…
Q: Wham Corp. is financed entirely by equity at the cost of 12%. The firm is expected to generate a…
A: Cost of equity (Re) = 12% Annual cashflow (EBIT) = $1000 Tax rate (T) = 40%
Q: SIROM Scientific Solutions has $10 million of outstanding equity and $5 million of bank debt. The…
A: The below expression can be used to calculate cost of equity:
Q: A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion.…
A: The net income of the company= $ 1,000,000,000 Tax rate=40% Total Assets = $10,000,000,000
Q: TechnoLink Berhad is currently an unlevered firm with a weighted average cost of capital (WACC) of…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: DuraMax Inc. manufactures car radios and reported $ 75 million in operating income last year on…
A: Computation of the ICR (interest coverage ratio) is as follows: The default spread at 3.75 ICR is…
Q: Kahn Inc. has a target capital structure of 60%common equity and 40% debt to fund its $10 billion in…
A: Calculate the cost of equity as follows: WACC = (After tax cost of debt*Weight of debt) + (Cost of…
Q: The profit margin is 15% and the dividend payout is 70%. Last year sales were RO 100 million and…
A: Financing is one of important financial decision for firm. To start up new activities or projects…
Q: Annamz Corp. is looking at two possible capital structures. Currently, the firm is an all-equity…
A: The break-even point is a scenario where a company is at a position of no profit, no loss. Reaching…
Q: You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35…
A: 1. Cost of Capital is the weighted average cost of capital , it is a rate that a company is…
Q: Compute the degree of financial leverage for a firm with EBIT of P6,000,000, fixed costs of…
A: Degree-of-Financial Leverage or DFL shows effect of variation in earnings of an entity or EBIT due…
Q: A firm has the following investment alternatives (refer to image): Each investment costs $3,000;…
A: sss
Q: Assume the hiking shoes division of the all about shoes corporation had the following results last…
A: Residual Income: Residual income is the net operating income that is earned by the investment…
1 Suppose you have a firm with investor-supplied capital of $30 million. Further suppose that the WACC of the firm is 9%, and you are given the following income statement of the firm. Show work for all parts requiring computation.
sales 26 M
operating cost 16 m
interest expense 3m
Taxes (44%)
What is the net income of the firm?
Step by step
Solved in 3 steps
- Please answer all. From a company we get the following:Capital employed 20,000,000 dollarDebt / equity ratio = 3Total income 40,000,000 dollarTotal profit 4,000,000 dollarInterest costs 1,500,000 dollarNet profit 2,500,000 dollara. Calculate the return on capital employed (Rsyss)b. Calculate the return on equity (Re)c. Show the relationship between profit margin and capital turnover rate and return on capital employedd. Demonstrate the relationship between the return on equity (Re) and the return on employed capital (Rsyss) with the help of the financial exchange!1.) A firm has an average investment of $100,000 during the year. During the same period, the firm generates an after-tax income of $16,000. The cost of capital is 15 percent. what is the economic profit? Required: a.) Calculate the ROI and calculate the Economic Profit.Assume that your firm has a return on assets of 14.7% , sales of $16,625,000, total assets of $4,750,000, a return on equity of 36.75%, an interest rate on total debt of 10 percent, and a tax rate of 40 percent. Given this information, determine the firm's basic earnings power. (Hint: you may need to work an income statement backwards to get EBIT, in which case you will need to determine the firm's net income or profit, as well as its interest expense on total debt.)
- A firm has a tax burden ratio of 0.85, a leverage ratio of 1.5, an interest burden of 0.9, and a return on sales of 12%. The firm generates $2 in sales per dollar of assets. What is the firm's ROE? (Do not round intermediate calculations. Round your answer to 2 decimal place.) ROE %The EBIT of a firm is $300, the tax rate is 35%, the depreciation is $20, capital expenditures are $60 and the increase in net working capital is $30. What is the free cash flow to the firm?To help them estimate the company's cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D₁ = $1.45; Po = $22.50; and gL = 6.50% (constant). Based on the dividend growth approach, what is the cost of common from reinvested earnings? O a. 13.59% O b. 12.94% c 11.10% d. 12.30% e. 11.68% O
- As the general manager of a firm, you are presented with an investment proposal from one of your divisions. Its net present value, if discounted at the cost of capital for your firm (which is 15 percent), is $ 1 00,000, and its internal rate of return is 20 percent. (a) What are the economic interpretations of the net present value and internal rate of return figures? In other words, what do they mean? (b) What, if any, additional information would you like to have before approving the project?Assume that a company has the following data: EBIT=1,200 EBITDA Margin=9.4% Tax rate 39% Net PP&E=2680 Net Working Capital=812 Sales = 14351 Depreciation and Amortization=376 Stores=400 Calculate Return on Capital (or ROIC) Please show your work.Consider a company that pays out all its earnings (i.e., the payout ratio = 1 or plowback/retention ratio=0). The required return for the firm is 13%. Compute the intrinsic P/E if its ROE is 15%. Compute the intrinsic P/E if its ROE is 20%. Discuss why your answers to parts (a) and (b) differ or do not differ from one another. Suppose that the company’s ROE is 13%. Compute its intrinsic P/E value. Would the answer to part (d) change if the company retained half of its earnings instead of paying all of them out? Discuss why or why not.
- the operating profitability ratio of company a is 2%. the return on invested capital is 10%. what is the capital requirement ratio for company ACalculate the ROE for a firm if it has a profit margin of 20%, an asset turnover of 2, and an equity multiplier of 1.4.Consider the following data: Free Cash Flow 1 = $27 million; Free Cash Flow 2 = $43 million; Free Cash Flow 3 = $48 million. Free Cash Flow 4= $62 million. Assume that free cash flow grows at a rate of 6 percent for year 5 and beyond. If the weighted average cost of capital is 12 percent, calculate the value of the firm.