The second image is the data table in the question (first image) 's tree cash flow, assuming KMS's market share will increase by 0.21% per year; investment, financing, and depreciation will be adjusted accordgiven in the table.The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depin these problems in anticipation of the return of standard depreciation practices during your career.The fThe fThe fThe fThe fThe fData table.(Click on the following icon in order to copy its contents into a spreadsheet.)Free Cash Flow (000)Net IncomeAfter-Tax Interest ExpenseDepreciationIncreases in Net Working CapitalCapital Expenditures2019$7.957228.005018846Print5,44905,024202220202021$9,325 $9,115 $9,4552282281,2615,4607,4137,4502,9023,1483,4385,024 28,0598,071Done2023$10,9981.2617,5123,7218,0712024$12,7441,2617,5964,0718,071OX ←Forecast KMS's free cash flow, assuming KMS's market share will increase by 0.21% per year; investment, financing, and depreciation will be adjusted accordingly; and working capital will be asgiven in the table.The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter andin these problems in anticipation of the return of standard depreciation practices during your career.The free cash flow in 2019 will be $The free cash flow in 2020 will be $The free cash flow in 2021 will be $The free cash flow in 2022 will be $The free cash flow in 2023 will be $The free cash flow in 2024 will be $thousand. (Round to the nearest integer.)thousand. (Round to the nearest integer.)thousand. (Round to the nearest integer.)thousand. (Round to the nearest integer.)thousand. (Round to the nearest integer.)thousand. (Round to the nearest integer.)

Answered: Forecast KMS's free cash flow, assuming…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 11P

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Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?
Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.
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Assume that today is December 31, 2022, and the following information applies to XavierAirlines:-After-tax operating income [EBIT (1 - T)] for the just ended year is $900 million.-The depreciation expense for the just ended year was $140 million.-The capital expenditure for the just ended year was $225 million.-There was no change in net operating working capital from the previous year.-Analysts estimate that Xavier’s free cash flow is expected to grow on average, at a rate of8% per year for the next 5 years after which growth is expected to moderate to 4% at aconstant rate.-The weighted average cost of capital (WACC) for Xavier is 10%.-The market value of the company's debt is $2.875 billion.-Xavier has 300 million shares of stock are outstanding.Using the corporate valuation model approach, what should be:a. The value of Xavier Airlines today (the firm)?b. The value of Xavier Airlines’ Common Equity?c. The intrinsic value of Xavier’s stock price today?
Give typing answer with explanation and conclusion If a firm is considering investing $100,000 at the end of 2021 for employee training (operating expense). The benefit of the training is to reduce turnover leading to a decrease in operating expenses of $10,000 per year in the future. The firm’s working capital to revenue ratio is 10% and the firm’s WACC is 6%. Is it better to analyze this investment decision by considering the incremental after-tax operating profit or the incremental after-tax cash flows generated by this investment? Why?
Nugent Communication Corp. is investing $7,311,256 in new technologies. The company expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years. Year 1 2 3 4-7 Cash Flows $2,540,230 $3,617,345 $2,867,006 $1,505,500 What is the discounted payback period for the project assuming a discount rate of 10 percent? (Round answer to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0 for the answer.) The discounted payback period for the project is ___________
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If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below? Year 0 1 2 3 4 5 6 Cash Flow (274,000) 68,000 73,000 76,500 78,000 82,500 77,000 Please explain why or why not the company should move forward with this endeavor.
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