You 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 $2.2 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, andthen at a constant rate of 1.424488% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-sharebasis.a. Assume that the company currently has $660 million of net PP&E.b. The company currently has $220 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 10 percent. This is based on a capital structure of two-thirds equity and one-third debt.e. The firm has 2 million shares outstanding.ADo not round intermediate calculations. Round your answer to the nearest cent

The operating margin is the profit earned by the company after its accounts for all the operating…

Answered: You are building a free cash flow to…

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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Asap Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 5.5%. The study period needs to be exactly 8 years and each year should have at least one unique cash-flow that is different from the cash-flows over the other years. Your answer should contain a table showing the cash-flows for each year and a graphical representation of the cash-flows (cash-flow diagram).
A process engineer plans on investing $5,000.00 now so that they may withdraw $500.00 a year for 12 years and still have $1,000.00 left in the account at the end of 12 years. a) Sketch the Cash Flow diagram. b) Write the equation for Present Worth of the cash flows in terms of the unknown rate of return. c) Calculate the rate of return on this investment using net present worth analysis techniques. (Hint: use linear interpolation).
Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 14.5%. The study period needs to be exactly 8 years and each year should have at least one unique cash flow that is different from the cash flows over the other years. Your answer should contain a table showing the cash flows for each year and a graphical representation of the cash flows (cash-flow diagram).
Suppose a company could invest in a machine that would be able to produce $1,000,000 worth of saleable merchandise in one year, $2,000,000 for another two years then $1,000,000 for another three years. If the required rate of return for the company is 8%, what is the value of the machine's future cash flows to the company today?
A new company estimates that by investing in a new process, it will increase its sales by $2.5 million one year from now and a further $1 million one and half year from now. Assume interest rate of 16% per year, compounded semiannually. Please write formula, use compound interest table for extracting factors, show your solution step by step. a) Draw cash flow diagram b) What is the maximum amount the company can afford to spend now on the new process in order to break even? Compare PP and CP and use first method (determine effective rate per compounding period).
A small start-up biotech firm anticipates that it will have cash outflows of $200,000 per year at the end of the next 3 years. Then the firm expects a positive cash flow of $50,000 at the EOY 4 and positive cash flows of $250,000 at the EOY 5-9. MARR is 15% per year? a.) What is the net AW? b.) What is the net FW? Please show the solution and not the one in excel thank you!
A new company estimates that by investing in a new process, it will increase its sales by $ 2 million one and a half years from now and a further $ 1.5 million two years from now. Assume interest rate of 18% per year, compounded semiannually. Please write formula, use compound interest table for extracting factors, show your solution step by step. a) Draw cash flow diagram b) What is the maximum amount the company can afford to spend now on the new process in order to break even? Compare PP and CP and use first method (determine effective rate per compounding period).
You are evaluating Adidas and expect it to generate the following free cash flows over your forecast horizon: Year 1 2 3 4 5 FCF ($ millions) 53.1 66.9 77.8 75.5 82.1 After your forecast horizon, you expect FCF to grow at 4.3% per year forever. If the weighted average cost of capital (dsicount rate) is 13.8%, what is: a. The enterprise value of Adidas. b. Assume Adidas has no excess cash, debt of $318 million, and 39 million shares outstanding, what is its stock price? Question content area bottom Part 1 a. The enterprise value will be $enter your response here million. (Round to two decimal places.) b. The stock price will be $enter your response here. (Round to two decimal places.)
Your consulting firm will produce cash flows of $190,000 this year, and you expect cash flows thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 5.2%, and you anticipate inflation of about 1.2%. a. What is the present value of your firm's cash flows for years 1 through 5? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. How would your answer to (a) change if you anticipated no growth in cash flow? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value
You are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 4% per year and continue at that level forever. Your company has just announced earnings of $1 million. What is the present value of all future earnings if the interest rate is 8%? (Assume all cash flows occur at the end of the year.) The present value is $ million. (Round to two decimal places.) ←
a firm wants to start a project. a team of financial analysts estimated the following cash flows. Years Cash Flow 0 -$100000 1 55000 2 43000 3 45000 suppose that the discount rate (interest rate) is 12%, the NPV will be?
You forecast the future cash flow of Jaffe Ltd, a young growing company. You expect fast growth through the first four years, at which time the company will mature and you expect it to grow by 2% per year forever more after. The following are the forecast cash flows: Year 1: $5 million Year 2: $10 million Year 3: $15 million Year 4: $20 million Year 5: $20.4 million Year 6: $20.808 million Year 7 onward: continued growth at 2% per year The discount rate is 9%. What is the value of Jaffe today at Year 0? (Do not round intermediate calculations. Report your result in millions of dollars. Round the final answers to 2 decimal places. Omit $ sign and the word “million" in your response. For example, if your answer is $1,234,567 just write 1.23.) Numeric Response

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