Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Textbook Question
Chapter 2, Problem 22P
Nova Electrics anticipates cash flow from operating activities of
a. What is the firm’s projected
b. What does the concept of free cash flow represent?
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1. Using PROBLEM 1, how much is the projected net income for 2022?
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3. Using PROBLEM 1, how much is the INTRINSIC Value of ABC Corporation?
4. Using PROBLEM 1, how much is the total present value of Free Cash Flows to ordinary shareholders of ABC Corporation?
5. Using PROBLEM 1, If your required return on investment is 12%, would you purchase the shares of ABC Corporation? Substantiate your answer.
YES
NO
2. Assume that today is December 31, 2021 and you need to determine the firm value of
CoolTech, Inc. You have decided to apply the free cash flow valuation model to the firm's
financial data that you've developed from a variety of data sources. The key values you have
compiled are summarized in the following table:
Free Cash Flow
Year
FCF
Other Data
Growth rate of FCF, beyond 2025 to infinity = 3%
Weighted average cost of capital = 8%
700,000
800,000
950,000
980,000
2022
%3D
2023
%3D
2024
2025
What is the value of the entire CoolTech's entire company?
+ Factac F%
Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm’s total corporate value (in millions)? Do not round intermediate calculations.
Year
1
2
Free Cash flow
-$50
$115
a. $1,295
b. $1,682
c. $1,833
d. $1,530
e. $1,446
Chapter 2 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
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Ch. 2 - Frantic Fast Foods had earnings after taxes of...Ch. 2 - Sosa Diet Supplements had earnings after taxes of...Ch. 2 - a. Swank Clothiers had sales of $383,000 and cost...Ch. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Given the following information, prepare an income...Ch. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prepare an income statement for Virginia Slim...Ch. 2 - Prob. 10PCh. 2 - Stein Books Inc. sold 1,900 finance textbooks for...Ch. 2 - Lemon Auto Wholesalers had sales of $1,000,000...Ch. 2 - Prob. 13PCh. 2 - Fill in the blank spaces with categories 1 through...Ch. 2 - Arrange the following items in proper balance...Ch. 2 - Elite Trailer Parks has an operating profit of...Ch. 2 - Quantum Technology had $669,000 of retained...Ch. 2 - Botox Facial Care had earnings after taxes of...Ch. 2 - Stilley Corporation had earnings after taxes of...Ch. 2 - Prob. 20PCh. 2 - The Rogers Corporation has a gross profit of...Ch. 2 - Nova Electrics anticipates cash flow from...Ch. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - For December 31, 20X1, the balance sheet of Baxter...Ch. 2 - Refer to the following financial statements for...Ch. 2 - Now click on “Balance Sheet� and compute the...Ch. 2 - Prob. 4WE
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