Given cash flows for Concatenator Manufacturing Division, calculate PV of near- term cash flows, PV (horizon value), and total value of firm; r= 10% and g = 6% 2 3 4 5 6 7 8 9 10 Asset value 10.00 11.20 12.54 14.05 15.31 16.69 18.19 19.29 20.44 21.67 Earnings 1.20 1.34 1.51 1.69 1.84 2.00 2.18 2.31 2.45 2.60 Net investment 1.20 1.34 1.51 1.26 1.38 1.50 1.09 1.16 1.23 1.30 Free cash flow (FCF) 0.00 0.00 0.00 0.42 0.46 0.50 1.09 1.16 1.23 1.30 Return on equity (ROE) 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 Asset growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06 Earnings growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06

Given cash flows for Concatenator Manufacturing Division, calculate PV of near- term cash flows, PV (horizon value), and total value of firm; r= 10% and g = 6% 2 3 4 5 6 7 8 9 10 Asset value 10.00 11.20 12.54 14.05 15.31 16.69 18.19 19.29 20.44 21.67 Earnings 1.20 1.34 1.51 1.69 1.84 2.00 2.18 2.31 2.45 2.60 Net investment 1.20 1.34 1.51 1.26 1.38 1.50 1.09 1.16 1.23 1.30 Free cash flow (FCF) 0.00 0.00 0.00 0.42 0.46 0.50 1.09 1.16 1.23 1.30 Return on equity (ROE) 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 Asset growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06 Earnings growth rate 0.12 0.12 0.12 0.09 0.09 0.09 0.06 0.06 0.06

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1CMA

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