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In 2012, Firm A had sales of $500 million, COGS of $210 million, SGAE of $70 million, depreciation (not included in COGS or SGAE) of $60 million, and a decrease in net PPE by $25 million. The marginal corporate tax rate was 20%. Net working capital was 15% of sales in 2011 as well as in 2012. Sales in 2011 were $470 million. There was no change in net other assets and no operating lease interest in 2012. Calculate Firm A's free cash flow (as appropriate in the WACC method) in 2012. Show your calculations. Write down exactly which formula or expression you use and which numbers correspond to each term.
Kleine Toymakers is introducing a new line of robotic toys, which it expects to grow their earnings at a much faster rate than normal over the next three years. After paying a dividend of $2.00 last year, it does not expect to pay a dividend for the ..
The company requires a 15% rate of return and uses straight-line depreciation to a zero book value over the life of its equipment.
Suppose you sell a fixed asset for $126,000 when its book value is $146,000. If your company’s marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
What is the difference between historical and implied market risk premium and which one is the most appropriate?
A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows:
A traveling salesman travels from city to city for business. At what annual mileage do the two methods give the same reimbursement?
You are considering buying stock in Biqing, Inc., a West Texas company that provides PPO medical services. The dividend just paid (i.e., D0) was $1.00 and is expected to increase by 20% per year for two years. Growth will then slow to 10% per year fo..
The interest rate is 3.82 percent. What is the annual dollar amount of interest you will receive each year?
On his 66th birthday the investor will make her first annual retirement withdrawal, and the final withdrawal will take place on her 93rd birthday.
Suppose that the labor market is perfectly competitive and the market wage is $15. What is the opportunity cost of the labor employed for the project?
What are the main forms of business ownership in the United States? What are the advantages and disadvantages of using each type of ownership structure?
Explain the basics of the discounted cash flow model for valuation. Explain the key differences between this and the dividend discount model.
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