Calculate the project and equity free cash flows

Assignment Help Financial Management

Reference no: EM131021793

Calculate the Project and Equity Free Cash Flows for the following scenario. We want to finance a project with 30% debt (70% equity). We expect $1,000,000 in sales for next year; COGS to be 55% of sales; depreciation will be $400,000 and offset with $400,000 in new CAPEX. Assume that Year 1 is the first year of a perpetuity with no growth (you get the t1 cash flow for ever). The firm's cost of debt is 4% (assume the debt is perpetual and you never pay down any principal); the cost of equity is 12%; the tax rate is 35%. Hint: to determine the EFCF, you will need to determine the value of the firm and the value of "D" so you can find the interest payment. Please use Excel..

Reference no: EM131021793

Questions Cloud

Write a paper on water purifier : Write a 2-3 page paper. In your paper document the steps you would take to organize a "focus group" for the product you are developing for course.

Marginal tax bracket and has required return on all projects : Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 79,000 2 92,000 3 106,000 4 101,000 5 82,000 Production of the implants will require $1,580,000 in net working capital to sta..

Describe the impact of an increase in the wages : Refer to the graphs below showing the supply of automobiles. Which of the graphs would best describe the impact of an increase in the wages and input prices firms must pay in order to produce automobiles

Discuss walgreens strategy in the context of marketing : Walgreens, one of the largest drugstore chains in the United States, recently built new flagship stores and expanded and upgraded existing stores. As a newspaper article described it: "More than a drugstore, Walgreens wants customers to be able to..

Calculate the project and equity free cash flows : alculate the Project and Equity Free Cash Flows for the following scenario. We want to finance a project with 30% debt (70% equity). We expect $1,000,000 in sales for next year; COGS to be 55% of sales; depreciation will be $400,000 and offset with $..

What is the IRR for the gold mine : The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to the treasurer, Monty Goldstein, “This is a golden opportunity.” The mine will cost $4,300,000 to open and will have an economic life of 11 years. It will generate a..

Should the companies re-brand their products : Hormel's Spam brand name is widely ridiculed and is associated with annoying commercial messages received via e-mail. Think of other cases of companies failing to protect their brand names. What can companies do about the situation now? Should the..

Carburetors, compute the total cost of making : Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product.

User Account

All Pages