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Free Cash Flow Model. You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of 0.5, and a tax rate of 30 percent. Assume a risk-free rate of 4 percent and a market risk premium of 9 percent. Lauryn's Doll Co. had EBIT last year of $42 million, which is net of a depreciation expense of $4.2 million. In addition, Lauryn's made $6 million in capital expenditures and increased net working capital by $1.0 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Firm value million
Explain why you don’t you see an account entitled “Retained Earnings” on the statement of cash flows?
John plans to buy a vacation home in 6 years from now and wants to have saved $91,024 for a down payment. How much money should he place today in a savings account that earns 8.11 percent per year compounded daily to accumulate money for his down pay..
They pay a $100 annual coupon and have a 15yr maturity, but they can be called in 5 years at $1,125. What is their yield to maturity.
Bally Manufacturing sent Intel Corporation an invoice for machinery with a $13,700 list price. Bally dated the invoice July 26 with 5/10 EOM terms. Intel receives a 20% trade discount. Intel pays the invoice on August 08. On August 1, Intel Corporati..
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 –$ 19,300 –$ 19,300 1 8,675 9,750 2 8,750 7,625 3 8,625 8,525 Calculate the IRR for each project. Negative amount should be indicated by a minus sign. What is ..
You have just inherited a large sum of money. You would like to make good use of your inheritance by putting it into an account that serves your retirement needs. You are planning your retirement and current expenditure. Therefore you don not withdra..
Determine the incremental cash flows associated with the proposed replacement. Be sure to consider the depreciation in year 6.
Based on Jason's cash flow, he can't currently afford more than $200 in car payments. What options does he have? How will these options affect his net worth and cash flow?
Suppose Apple produces 10,000 MacBooks in December of 2013 with an estimated market value of 2,000 each. None of those are sold until sometime in the spring of 2014. How much would GDP increase in 2014?
Quentin wants to give Rowena a pearl necklace that he has in his safe deposit box at Security Bank.
The treasurer for Chic Man Clothing must decide how much money the company needs to borrow in July. The company expects sales of $400,000 for July. The company has observed that 25% of its sales is for cash and that the remaining 75% is collected in ..
Assume your bank is considering the problem of raising $80 million in money market funds to cover a loan request from one of its largest corporate customers. What would you recommend to the fund management department regarding how and where to raise ..
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