Answered: The EBIT of a firm is $300, the tax…

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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure…

A: The weighted average cost of capital refers to the cost that is incurred by the company for raising…

Q: An entire company being valued has free cash flows forecasted as shown and a terminal value of…

A: The discounted cash flow valuation model is a metric that evaluates the worth of the project or…

Q: I need step by step solution

A: We have given data, Sales = $502,000Depreciation expense = $47,000Profit margin = 5%Tax rate = 35%…

Q: The following information is available for Multicomm Limited : Asset/Sales is 0.9, change in sales…

A: The internally generate funds can be calculated as per AFN equation

Q: EMC has a current free cash flow of 1 million is expected to grow at a constant rate of 5%. The…

A: The value of firm’s operation can be calculated with the help of below formula,

Q: Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the…

A: Weight of long-term debt = 40%Weight of preferred stock = 15%Weight of common stock = 45%Selling…

Q: Finance A firm's expected free cash flows in year 1, 2, and 3 are $30 million, $35 million,…

A: Horizon Value is also known as terminal value. It can be calculated by following formula:- Terminal…

Q: I need help with question is answer

A: As per the data shared by Dog House:Sales = $502,000Depreciation expense = $47,000Profit margin =…

Q: Using PROBLEM 1, how much is the projected net income for 2022?

A: 1. A projected income statement depicts earnings and deficits for a certain future time, such as the…

Q: You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's…

A: To increase production capacity, boost operational effectiveness, or advance technology, businesses…

Q: Suppose you have a market value of equity equal to $ 500 million and a market value of debt equal to…

A: We will first determine the total market value of capital. Total market value of capital = market…

Q: A firm has a tax burden of 0.7. a leverage ratio of 1.3, an interest burden of .8, and a…

A: We need to use Du Pont method to calculate ROE. The equation isROE = Tax burden ratio*Interest…

Q: QUESTION 2. Evaluate the following investment project according to the internal rate of return and…

A: Information Provided: WACC = 21% Cash flow (0) = (250,000) Cash flow (1) = (100,000) Cash flow (2) =…

Q: need help

A: Step 1: (1). ROE Calculation for the Firm: Given: Times Interest Earned (TIE) Ratio = 2 Tax…

Q: A firm needs $200,000 to start and expects Sales Expenses Tax rate $300,000 $294,000 40% a. What are…

A: Here, 40% debt:$200,000*40% = $80,000 Particulars 100% equity 40% debt Sales $ 300,000.00 $…

Q: What is the incremental cash flow for a company that forgoes $7000 p.a. rental for factory space for…

A: Incremental cash flow is the cash flow that a company is able to realize after it accepts a new…

Q: You are evaluating Adidas and expect it to generate the following free cash flows over your…

A: Terminal value = whereFCF = free cash flowsg = growth rater = discount rate

Q: Please provide correct solution for answer

A: Step 1: Given that, Sales = $502,000 Profit margin = 5% Net income = Sales * Profit margin…

Q: Consider a company with EBIT of $450,000, tax rate of 25%, depreciation and amortization expenses of…

A: Free cash flow is the amount of cash flow available to investors after the firm has met all…

Q: If cash flow from operating activities is 700,000, tax rate is 30%, and capital expenditure is…

A: Free cash flow is $410,000. Computation of free cash flow: Excel spread sheet:

Q: 3. For a firm with the following info., what is the Net Working Capital? Prepaid expenses=$2…

A: Net Working Capital :— Net Working is the Difference between the Total Current Assets - Total…

Q: You are considering an investment in Ray company, and want to evaluate the firm's free cash flow.…

A: Operating Cash flows are the Cash inflows and Cash outflows that result from carrying of business.…

Q: te Fields and St ers's inve ent operating capital. Note: Enter your answer in millions of dollars.…

A: Operating cash flow is the cash flow available in the company after doing payments for all necessary…

Q: Which of the following would be most likely be included as part of free cash flows? The lost revenue…

A: The amount available to the shareholders as a result of uptaking an investment is known as the…

Q: Calculate working capital when: Cash=$100, Creditors=$100, Short-term loan=$100, Inventory…

A: Given: Cash = $100 Creditors = $100 Inventory = $100 Short term loan = $100

Q: Calculate a firm's free cash flow if it has net operating profit after taxes of R60,000,…

A: Free cash flow to the firm (FCFF) represents the cash flow from operations available for…

Q: Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the…

A: A company's average after-tax cost of capital from all sources, including common stock, preferred…

Q: with the $440,000 investment which company would you prefer to invest

A: Information Provided: Company 1 Cash flows: Year 1 = 30,000 Year 2 = 50,000 Year 3 = 80,000 Year 4…

Q: Solve this problem

A: To calculate the operating cash flow (OCF) using the information provided, we can use the following…

Q: Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the…

A: To calculate the weighted average cost of capital (WACC) for Dillon Labs, we need to follow these…

Q: Please solution

A: As per the data shared by Dog House:Sales = $502,000Depreciation expense = $47,000Profit margin =…

Q: A firm has sales of $4,790, costs of $2,590, interest paid of $174, and depreciation of $483. The…

A: Calculating the Earnings before Interest and taxes ( EBIT )Earnings before Interest and taxes…

Q: You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm’s…

A: Free cash flows refer to the cash generated by the business organization from its operational…

Q: The ABS company has a capital base of $250 million, an opportunity cost of capital (A) of 17%, a…

A: Economic value added 9EVA) measures the performance of company based on residual wealth calculated…

Q: ager each specific type of capital as well as the weighted average cost is to be measured by using…

A: WACC is the expected rate that the company is expecting to pay to the sources of finance. In this,…

Q: If a company is expected to generate annual cash flow of $500,000 and has a WACC of 12.5%, then the…

A: The valuation of a company is calculated with help of the revenue before subtracting operating…

Q: You expect Apple Corporation to generate the following free cash flows over the next five years:…

A: Enterprise value is the value of the firm consisting of the stock, debt, and preferred share.…

Q: I need correct solution for correct answer please provide

A: Given: Sales= $502000Depreciation= $47000Profit margin= 5%Tax rate= 35% Calculate the earnings…

Q: a. The after-tax cost of debt using the bond's yield to maturity (YTM) is %. (Round to two decimal…

A: As per the question, subpart-a is specifically asked to answer. Hence as per the honoring guidelines…

Q: Ashwell Corp has $1,700,000 of sales, $250,000 of inventories, $175,000 of receivables, and $125,000…

Q: If a firm has an EV of $820 million and EBITDA of $187 million, what is its EV ratio?

A: Given: EV = $820 million EBITDA = $187 million

Q: Solve this question please

A: Correct answer: Option B) -3.70%. Explanation:Step :Net income = EBIT * ( - Tax rate)Net income =…

Q: A company’s free cash flow was just FCF0 = $4.25 million. The weighted average cost of capital is…

A: Value of operations at year 0 = Expected Free cash flow in year 1/(WACC - growth rate)

Question

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?

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Calculation of Free Cash Flow

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A company has generated over the last year, with the sales of all its product lines, an operating profit (EBIT) of € 12,300 and a financial return (ROE) of 20%. They have had financial expenses of € 5,000 with a capital cost of 10%. a) What is their economic profitability (ROA)? b) What type of leverage factor do they have and what should they do to improve ROE for shareholders?
i need the answer quickly
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 $70 million, had a tax rate of 21 percent, and its depreciation expense was $7 million. Fields and Struthers's NOPAT gross fixed assets increased by $36 million from 2020 and 2021. The firm's current assets increased by $32 million and spontaneous current liabilities increased by $18 million. Calculate Fields and Struthers's NOPAT operating cash flow for 2021. Calculate Fields and Struthers's NOPAT investment in operating capital for 2021. Calculate Fields and Struthers's NOPAT free cash flow for 2021.
Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 10% preferred stock, and 50% common stock equity (retained earings, new common stock, or both). The firm's tax rate is 24%. Debt The firm can sell for $1000 a 11-year, $1,000-par-value bond paying annual interest at a 12.00% coupon rate. A flotation cost of 4% of the par value is required. Preferred stock 8.50% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $3 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $80 per share. The stock has paid a dividend that has gradually increased for many years, rising from $2.25 ten years ago to the $4.43 dividend payment, Do. that the company just recently…
JohnBoy Industries has a cash balance of $52,000, accounts payable of $132,000, inventory of $182,000, accounts receivable of $217,000, notes payable of $127,000, and accrued wages and taxes of $40,500. How much net working capital does the firm need to fund? Net working capital funding need GA
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.)
ok You are considering an investment in Fields and Struthers, Incorporated, and want to evaluate the firm's free cash flow From the income statement, you see that Fields and Struthers earned an EBIT of $66 million, had a tax rate of 21 percent, and its depreciation expense was $5 million. Fields and Struthers's gross fixed assets increased by $32 million from last year to this year. The firm's current assets increased by $28 million and spontaneous current liabilities increased by $16 million. Calculate Fields and Struthers's NOPAT Note: Enter your answer in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) NOPAT Calculate Fields and Struthers's operating cash flow Note: Enter your answer in millions of dollars rounded to 2 decimal places. (i.e., Enter 5,500,000 as 5.50.) Operating cash flow Investment in operating capital million Calculate Fields and Struthers's investment in operating capital. Note: Enter your answer in millions of dollars. (i.e.,…
) Suppose a company’s current free cash flow (i.e. FCF0) is $100 million and is expected to grow at a constant rate of 5 percent. If the company’s overall cost of capital is 15 percent, what is the current value of operations? $ 913 million $1,000 million $1,050 million $1,500 million $2,000 million
3. The average net profits expected in future by Khalifa and Co. are RO. 30,000 per year. The average capital employed in the business by firm is RO. 200,000. The normal rate of return on the capital employed in similar business is 10%. Calculate good will of the firm by: 1. Super Profit Method on the basis of two-year purchase 2. Capitalization Method
Assume the following: • A company is importing and selling Mercedes cars. • An Islamic bank invests US$8 million for an 80% profit share. • An investor invests US$2 million for a 20% profit share. • The investor is to be paid a 10% management fee as percentage of profit after expenses. • Sale proceeds = US$12,400,000 Expenses = US$200,000 Calculate the following: 1.1. The total return to the bank: 1.2. The total return to the investor:
Calculation of individual costs and WACC Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 15% preferred stock, and 45% common stock equity (retained earnings, new common stock, or both). The firm's tax rate is 28%. Debt The firm can sell for $1015 a 19-year, $1,000-par-value bond paying annual interest at a 9.00% coupon rate. A flotation cost of 2.5% of the par value required. Preferred stock 7.50% (annual dividend) preferred stock having a par value of $100 can be sold for $98. An additional fee of $5 per share must be paid to the underwriters. Common stock The firm's common stock is currently selling for $60 per share. The stock has paid a dividend that has gradually increased for many years, rising from $3.00 ten years ago to the $4.44 dividend payment, Do, that the company just recently made.…
Please help me. Thankyou.