Estimate next years free cash flow to equity

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In the most recent year, WBA had a poor financial performance. The company made only $40 million in net income. It expects next year to be more normal.

The book value of equity is $1 billion, and the average return on book equity over the previous 10 years (assumed to be a normal period) was 10%.

The mangement of WBA plans to make $ 0 million in new capital expenditures next year. It expects depreciation, which was $60 million this year, to grow 10% next year.

The company had revenues of $1.5 billion this year, and it maintained a non-cash working capital investment of 10% of revenues. It expects revenues to increase 20% next year and working capital to decline to 9.5% of revenues.

The firm expects to maintain its existing debt policy (in market value terms). The market value of equity is $1.5 billion. The debt outstanding (in both book and market terms) is $500 million.

Estimate next years Free Cash Flow to Equity?

Reference no: EM133057994

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