Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 12PS
Eagle Products’ EBIT is
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Given are the following data for year 1:Revenue = $45 million; Variable cost = $10 million; Fixed cost = $5 million; Depreciation = $1 million; Interest expense = $3 million; Capital expenditure = $12 million; Change in working capital = $2 million. Corporate tax rate is 30%. Calculate the free cash flow to firm (FCFF) for year 1:
a.
$4.2 million
b.
$6.3 million
c.
$7.3 million
d.
$5.2 million
If the free cash flow to the firm (FCFF) is P20M, the interest expense is P2M, the tax
rate is 40%, the company had to inject 3M in capital expenditures but there are no
changes in working capital, what is the free cash flow to equity (FCFE) for that
year?
a. P21.8M
b. P18.8M
c. P24.2M
d. P25.0M
e. None of the
ve.
A firm's net income is $36 million, depreciation is $3 million, its investments in fixed capital totals $13 million, its AFTER-TAX interest totals $4 million and its investment in working capital totals $5 million. The tax rate is 40%. What is its Free Cash Flow to the Firm?
a.$27.00 million b. $25.00 million c. $23.40 million d. $25.40 million
Give typing answer with explanation and conclusion
Chapter 13 Solutions
Essentials Of Investments
Ch. 13 - Prob. 1PSCh. 13 - Prob. 2PSCh. 13 - If a security is underpriced [Lew intrinsic value...Ch. 13 - Deployment Specialists pays a current (annual)...Ch. 13 - Jand, Inc, currently pays a dividend of 1.22,...Ch. 13 - A firm pays a current dividend of 1, which is...Ch. 13 - Tri-coat Paints has a current market value of 41...Ch. 13 - A firm has current assets that could be sold for...Ch. 13 - Prob. 9PSCh. 13 - Miltmar Corporation will pay a year-end dividend...
Ch. 13 - Sisters Corp. expects to earn 6 per share next...Ch. 13 - Eagle Products’ EBIT is 300 , its tax rate is 21 ,...Ch. 13 - FinCorp’s free cash flow to the firm is reported...Ch. 13 - A common stock pays an annual dividend per share...Ch. 13 - The risk-free rate of return is 5 , the required...Ch. 13 - Explain why the following statements are...Ch. 13 - a. Computer stocks currently provide an expected...Ch. 13 - Prob. 18PSCh. 13 - a. MF Corp. has an ROE of 16 and a plowback ratio...Ch. 13 - The market consensus is that Analog Electronic...Ch. 13 - The FE Corporation’s dividends per share are...Ch. 13 - The stock of Negro Corporation is currently...Ch. 13 - The risk-free rate of return is 8 , the expected...Ch. 13 - Prob. 24PSCh. 13 - Chiptech, Inc., is an established computer Chip...Ch. 13 - Prob. 1CPCh. 13 - 2. Phoebe Black‘s investment club wants to buy the...Ch. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - 7. Shaar (from the previous problem) has revised...Ch. 13 - Prob. 8CP
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- A company is considering an investment where the estimated cash flows are as follows: Year Cash Flow 0 (100000) 1 60000 2 80000 3 40000 4 30000 The company cost of capital is 13%. What is the NPV? 51800 61871 56800 122000 51000arrow_forwardCalculate a firm's free cash flow if it has net operating profit after taxes of R60,000, depreciation expense of R10,000, net fixed asset investment requirement of R40,000, aarrow_forwardCalculate a firm's free cash flow if it has net operating profit after taxes of P60,000, depreciation expense of P7,000, an interest expense of P1,000, a net fixed asset investment of P30,000, a net current asset requirement of P15,000 and a tax rate of 30%.arrow_forward
- Find the present value of the streams of cash flows shown in the following table. Assume that the firm's opportunity cost is 12%. A B C Year Cash Flow Year Cash Flow Year Cash Flow 1 -$2,000 1 $ 10,000 1-5 $ 10,000/yr 2345 5 2 3,000 2-5 5,000/yr 6-10 8,000/yr 4,000 6 7,000 6,000 8,000arrow_forwardAssume a firm has EBAT of $590,000, and no amortization. It is in a 40 percent tax bracket. a. Compute its cash flow. $ 354,000 b. Assume it has $590,000 in amortization. Recompute its cash flow. $ 590,000 c. How large a cash flow benefit did the amortization provide? $T] Cash flow Cash flow Benefit in cash flowarrow_forwardCalculate a firm's free cash flow if it has net operating profit after taxes of P60,000, depreciation expense of P10,000, net fixed asset investment requirement of P40,000, a net current asset requirement of P30,000 and a tax rate of 30%arrow_forward
- ) Assuming a 9% cost of capital, find the modified internal rate of return for the following cash flows: a. 19.78% b. 6.95% c. 13.64% d. 7.86% Year Cash Flow 0 1 2 3 -$175 $167 $240 -$120arrow_forward10) Find the present value of the following stream of a firm's cash flows, assuming that the firm's opportunity cost is 14 percent. YEAR AMOUNT 1-5 20,000$/YR 6-10 35,000$/YRarrow_forwardSuppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.arrow_forward
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