None Assumptions Projected Revenue 10,000 10,500 11,000 Projected Operating Income (EBIT) 1,000 1,100 1,200depreciation/Sales 10.00% 10.00% 10.00% Capital Expenditure/Sales 5.00% 5.00% 5.00% Interest Expense300 300 300 Increase in Net Working Capital/Sales 2.00% 2.00% 2.00% Marginal Tax Rate 30.00% 30.00% 30.00%Weighted Average Cost of Capital (WACC) 10.00% 10.00% 10.00% Terminal Growth Rate (%) 4.00% 4.00% 4.00%Market Value of Debt 5,000 5,000 5,000 Number of Share Outstanding 200 200 200 Today FY1 FY2 FY3 EBIT (Earningsbefore Interest & Tax) Interest Expense Tax Net Income Depreciation Operating Cash Flow (OCF) Capital ExpenditureIncrease in Net Working Capital Free Cash Flow (FCF) Terminal Value PV of FCF and Terminal Value Sum of All PV (Enterprise value) Market Value of Debt Value of Equity Number of Share Outstanding Share Price

To simplify the question, let's calculate the Free Cash Flow (FCF) for each year and the Terminal…

Answered: Assumptions Projected Revenue 10,000…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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Georgetown Berbice Income before tax. 20,000 75,000Required rate of return. 12% 12%Investment 100,000 500,000 Calculate the residual income for Georgetown a. 1,500 b. 150,000 c. 15,000 d. 8,000
Year 1 Year 2 Year 3 Premiums 120 110 100 Investment Income 0 10 20 Claims 55 55 100 Expenses 75 5 5 Solvency Reserve 100 125 0 Benefit Reserve 50 60 0 DAC 70 40 0 Required Capital 5 10 0 Assume reserves, DAC, and required capital are EOY amounts No taxes Required capital investment income rate = 0% Calculate the ROE (as percentage) at the end of year 1.
Residual Income $23000 Operating income 32,342 Cost of Capital 12% What is return on inveretement? Don't round any intermediate calculations. Enter your answer to one decimal place. Do not use commas, percentage or dollar signs.
$1,449,185 Sales $130,380 Operating Income Total Assets (investment) $544,102 Target Rate of Return (Cost of 15% Capital) What is return on investment? Input your answer to 1 decimal place. For example if you calculate.1892 enter 18.9.
Residual Income $23000 Operating income 45,337 Cost of Capital 12% What is return on investment? Don't round any intermediate calculations. Enter your answer to one decimal place. Do not use commas, percentage or dollar signs.
Operating cash flow Projected Sales, $M 31.0 Operating Costs [No Deprec.], $M 14.0 Depreciation, $M 6.0 Interest Expense, $M 7.0 Marginal Tax Rate 38.00% 1st Year Operating Cash Flow
Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Operating Income Net Cash Flow Investment Year Proposal A: $450,000 $ 30,000 1 $120,000 2 30,000 120,000 3 20,000 110,000 4 10,000 100,000 (30,000) $ 60,000 $ 60,000 40,000 60,000 $510,000 $100,000 Proposal B: $200,000 1 80,000 3 20,000 60,000 4 (10,000) 30,000 (20.000) $ 90,000 20.000 $290,000 (Continued)
Baltusrol Inc. has the following three investment opportunities. A P70,000 10,000 B Initial investment Initial working capital required Cash inflows by year: Year 1 P70,000 5,000 P70,000 8,000 P35,000 35,000 10,000 5,000 8,000 P83.000 P1,250 P35,000 10,000 45.000 20,000 2,000 P112.000 P10,000 P4,000 8,000 10,000 98,000 5.000 P125.000 P12,500 Year 2 Year 3 Year 4 Released working capital Total Average annual income Required: 1. Rank the investment opportunities in order of desirability using. A. Payback period. B. Average book rate of return (use average net book value of the investment as the denominator), and C. NPV using a 16% discount rate. 2. Determine the profitability index for each opportunity and rank the investments based on these values.
ements What is the total Wealth Accumulation of the following investment assuming the available after tax reinvestment rate is 5%? IRR 10.70% O $4,690,000 O $4,821,078 O $4,848,844 $4,905.989 n 0 $ 1 S 2 $ 3 $ AS 5 $ Investment $ (3,000,000) 240,000 250,000 260,000 266,000 3,674,000
($ thousands) Present value at 19% Net cash flow Net present value 0 1 4 -13,700 -1,594 -13,700 -1,339 3,541 (sum of PVs). Period 2 3 6 3,057 6,433 10,644 10,095 5,867 2,159 3,817 5,308 4,230 2,066 5 7 3,379 1,000 Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 19% nominal rate and 11% expected inflation. NPV should be unchanged at +3,541, or $3,541,000. Note: Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Real Net Cash Flows NPV
Weighted Average Cost of Capital (WACC) using Table (Problem 11 in text) Financing Source Dollar Amount % Weight Interest Cost of Rate Capital After Tax Cost (D X (1-tax rate) Component to Sum (FXC) Short Term Note $ 200,000.00 15% Long Term Note $ 300,000.00 18% Equity Capital $ 500,000.00 25% Assumes 30% Tax Rate SOLVE FOR YELLOW HIGHLIGHTED BLOCKS WACC
Calculate the equivalent AW at i= 10% per year for the following net cash flow: Year Cash flow, $ -2,000 2. -2,000 3 -2,000 4 5,000 5,000 5,000 Select one: O a. 573.9 O b. 1,431.9 O c. 1,860.9 O d. 1,002.9 O e. 2.289.9

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