Determining firm-s expected free cash flow to equity

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Reference no: EM1310275

1) A firm presently has sales per share of= $10.00 and expects sales to rise by 25% next year. Net profit margin is expected to be 15%. Fixed capital investment net of depreciation is projected to be 65% of sales increase and working capital needs are 15% of projected sales increase. Debt will finance 45% of investments in net capital and working capital. Company has the 11% required rate of return on equity. Determine the firm’s expected free cash flow to equity (FCFE) per share next year under these suppositions?

2) The difference between free cash flow to equity and free cash flow to firm is? The repayments of the significant amount of outstanding debt will, other things being equal, cause free cash flow to equity to?

Reference no: EM1310275

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