Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337395250
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Textbook Question
Chapter 17, Problem 3P
AFN EQUATION Refer to problem 17-1 and assume that the company had $3 million in assets at the end of 2018. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in problem 17-1?
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Question 3: Study the following financial statements.
What was NOWC for 2017 and 2018? Show the calculation and circle your answer. Assume that all
cash is excess cash; i.e., this cash is not needed for operating purposes.
Calculate the Free Cash Flow in 2018. Show the calculation and circle your answer.
What was 2018 EVA? Show the calculation and circle your answer. Assume that its after-tax cost of
capital is 10%.
What was MVA at the year-end 2018? Show the calculation and circle your answer. (Note: Share
Price is $25)
An analyst is studying the company LEMO in order to make an investment decision. The
investor's estimates of Free Cash Flows to Firm (FCF), levels of debt and net Financial
Expenses (FE) of the company are presented in Table 1.
Table 1
Year 2020 Year 2021 | Year 2022 | Year 2023
Year 2024
Year 2025
FCF
€10000
€11300
€10950
€12500
€12750
Level
of €1000
€1200
€1450
€1350
€1600
€1675
debt
FE
€70
€90
€100
€108
€115
Additionally, the analyst has made the following assumptions: (i) risk-free interest rate: 1.5
%; (i) target capital structure: debt/(debt + equity) ratio of 45%; (ii) equity risk premium:
6%; (iv) asset beta: 1.15; and (v) tax rate: 20%. The number of shares of the company is 1
2000 and the current market price of LEMO is €8.0 per share. Present your result rounded
to one decimal place.
a. Compute the yearly Equity Free Cash Flows (EFCF) for the period from 2021 until
2025. Explain your answer.
b. Assume the expected nominal growth rate of the EFCF in perpetuity is 1.25%.…
Choose the correct answer with solution. Pls choose only the answer in the choices.
Q1. How much is the net cash flow of Gising Company in Year 1?a. 390,000b. 290,000c. 220,000d. 140,000Q2. How much is the terminal value recognized after the three-year forecast period?a. 10,880,000b. 12,466,667c. 13,090,000d. 10,880,000Q3. What is the net Cash flow to the Firm?a. 11,140,489b. 12,103,272c. 12,808,412d. 13,974,000Q4. What is the net cash flow to equity?a. 10,140,489b. 11,103, 272c. 11, 140, 489d. 12, 103, 272
Chapter 17 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 17 - Prob. 1QCh. 17 - Assume that an average firm in the office supply...Ch. 17 - Would you agree that computerized corporate...Ch. 17 - Certain liability and net worth items generally...Ch. 17 - Suppose a firm makes the following policy changes....Ch. 17 - AFN EQUATION Carlsbad Corporation's sales are...Ch. 17 - AFN EQUATION Refer to problem 17-1. What...Ch. 17 - AFN EQUATION Refer to problem 17-1 and assume that...Ch. 17 - PRO FORMA INCOME STATEMENT Austin Grocers recently...Ch. 17 - EXCESS CAPACITY Williamson Industries has 7...
Ch. 17 - REGRESSION AND INVENTORIES Jasper Furnishings has...Ch. 17 - PRO FORMA INCOME STATEMENT At the end of last...Ch. 17 - LONG-TERM FINANCING NEEDED At year-end 2018, total...Ch. 17 - SALES INCREASE Paladin Furnishings generated 4...Ch. 17 - REGRESSION AND RECEIVABLES Edwards Industries has...Ch. 17 - REGRESSION AND INVENTORIES Charlie's Cycles Inc....Ch. 17 - EXCESS CAPACITY Earleton Manufacturing Company has...
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- (Ignore income taxes in this problem.) Your Company is considering an investment that has the following data: Year 1 2 3. 4. Investment $20,000 Cash inflow $2,000 $2,000 $5,000 $4,000 $60,000 In what year does the payback period for this investment occur? O Year 2. O Year 3. Year 4. Year 5.arrow_forwardThe following table tracks the main components of working capital over the life of a four-year project. 2020 2018 241,000 138,000 0 0 58,000 0 Accounts receivable Inventory Accounts payable 2016 0 83,000 29,000 Not working capital Cash flows 2017 166,000 138,000 54,000 Calculate net working capital and the cash inflows and outflows due to investment in working capital. (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.) 2016 2019 206,000 103,000 39,000 2017 2018 2019 2020arrow_forwardConsider the following cash flows: Year Cash Flow 0 –$7,400 1 2,100 2 4,700 3 1,900 4 1,600 What is the payback period for the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forward
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