Time Warner is considering a sale of its publishing division. The division had earnings EBITDA of $550 million in the most recent year (depreciation was $150 million), growing at an estimated 5% a year (you can assume that depreciation grows at the same rate). The return on capital in the division is 15%, and the corporate tax rate is 40%. If the cost of capital for the division is 9%, estimate the following: a. EV/FCFF multiple. b. EV/EBIT multiple. c. EV/EBITDA multiple.

Q: The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of two major…

A: Given Information: Earnings : $ 4 million Cost of project : $ 10 million Dividend payout ratio : 50%…

Q: A company with $630,000 in operating assets is considering the purchase of a machine that costs…

A: If cash flows are uneven,then  Payback period(PBP)=Years before full recovery+ (uncovered cost at…

Q: Flint Systems is considering investing in production- management software that costs $630,000, has…

A: The correct option is as fallows

Q: Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Crazytown Motors is expected to have an EBIT of $680,000 next year. Depreciation, the increase in…

A: EBIT Year 1 = $680,000 Depreciation = $45,000 Increase in Net working capital = $9,000 Capital…

Q: A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000…

A: Net present value =Present value of cash inflows -Present value of cash outflows If the Net present…

Q: One of your company's managers says that a $120,000 piece of machinery will be paid off in 12 months…

A: When the timing of cash flows differs, it is important to compute the present value of these cash…

Q: Employees at JPGR Inc have been busy evaluating a potential new $9 million investment for their firm…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: Jordan Corporation is considering a new product that will be very popular for a couple of years and…

A:

Q: Time Warner is considering a sale of its publishing division. The division had earnings EBITDA of…

A: The FCFF valuation approach analyzes the value of the firm as the discounted value of future free…

Q: Regina Industries has a new product whose sales are expected to be 1.2, 3.5, 7, 5, and 3 million…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You are asked to evaluate the following project for a corporation with profitable ongoing…

A: Net present value is a capital budgeting techniques which makes the decision making process easier…

Q: Downtown Partners is considering an investment of $500,000 in an early stage company, Newco.…

A: The required rate of return means the least profit an investor expects to collect from the…

Q: Bennett Industries invested $10,000,000 in a coventure one year ago. One year later, Bennett…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely…

A: Hi there.  Thanks for posting the question.  As per policy we answer only 3 sub questions.  Please…

Q: North Construction had $850 million of sales last year, and it had $425 million of fixed assets that…

A: Growth rate in sales is the percentage increase in the sale revenue. The growth rate shows the…

Q: Phillips Refining plans to expand capacity by purchasing equipment that will provide additional…

A: Symbol Value Meaning P ($16,000,000) Initial cost A $3,800,000 Annual revenue…

Q: Chae is valuing a new division and has identified a comparable firm which has an expected return on…

A: WACC is a weighted average cost of the firm to raise the funds from different sources. WACC is used…

Q: Tong foong Co. Ltd has decided that its capital budget during the coming year will be $20 million…

A: Given in the question that, The company has $200,000,000 of assets The optimal capital structure is…

Q: Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely…

A: NPV termed as Net Present Value which is defined as the difference among the PV (Present Value)…

Q: Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely…

A: Formulas for the above table are as follows:

Q: Mullen Group is considering adding another division that requires a cash outlay of $30,000 and is…

A: The Net Present Value is a financial analysis technique for assessing the profitability of an…

Q: Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely…

A: Net present value is the excess of present value of cash inflows over cash outflows

Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Pearl Corp. is expected to have an EBIT of $2,400,000 next year. Depreciation, the increase in net…

A: Let us first calculate the firm value of Pearl Corp. The firm value is equal to sum of the present…

Q: A new firm expects to generate Sales of  $124,900.  POINT BLANK has variable costs of $77,500, and…

A: Sales = $124,900 Variable Cost = $77,500 Fixed Cost = $18,000 Depreciation = $4300 Tax = 35%…

Q: You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The…

A: NPV of New Product Line = Present Value of Future Cash Flows - Initial Investment

Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…

A: Here, Target Operating Profit Margin is 25% Contribution Margin is 40% Average Annual Sales is…

Q: Quiet Quilts is considering adding another division that requires a cash outlay of $29,500, and is…

A: The capital budgeting is a technique that helps to analyze the profitability of the project and…

Q: Big Boom Ltd. has developed new manufacturing technology that has given it a competitive advantage…

A: GIVEN, D0=$1.65r=7%g1=12%g2=11%g3=9%g=5% dividend calculation. D1=D0×1+g1=1.65×1.12=…

Q: The Singer Division of Patio Enterprises currently earns $2.34 million and has divisional assets of…

A: Residual income is the income that is available after attributing the cost of capital employed, for…

Q: Pearl Corp. is expected to have an EBIT of $1,900,000 next year. Depreciation, the increase in net…

A: Given information: EBIT is $1,900,000 Depreciation is $160,000 Net working capital is $80,000…

Q: Ace Corporation is considering expanding its operations. If it expands, its current accounts are…

A: Change in working capital is difference between current assets and current laibilties.

Q: You are asked to evaluate the following project for a corporation with profitable ongoing…

A: Net present value is the value of cash inflows earned from a project after deducting the value of…

Q: Al-Shamukh Constructors Ltd.currently has sales of OMR 24 million a yearwith a stock level of 25…

A: Return on assets is equal to net income divided by total assets.

Q: Earleton Manufacturing Company has $3 billion in sales and $661,000,000 in fixed assets. Currently,…

A: Target fixed assets to sales ratio shows the assets that will be required when company is operating…

Q: The vice president of operations at Dintell Corporation, a majorsupplier of passenger-side…

A: 1) Net expected present value can be found out by getting expected sales from the expected market…

Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of two major…

A: The expansionary cost for any project or business is sourced by debt and equity in a proportion in…

Q: LAL Corporation currently generates revenues of $1 million per year. Next year, revenues will either…

A: Time value The amount received today by the person has more worth than the same value to be received…

Q: The Glexon mill has total assets of $91,600, current liabilities of $9,700, dividends paid of…

A: Particulars   Total Assets  (A) $ 91,600 Current liabilities (L) $ 9,700 Sales (S0) $ 38,400…

Q: Jordan Corporation is considering a new product that will be very popular for a couple of years and…

A: Internal rate of return: It is the rate of return at which net present value of the project is equal…

Q: Southern Timber Company expects to have an EBIT of $10 million in the coming year, and its EBIT is…

A: According to M&M Model the value of levered firm will be sum of value of unlevered firm plus tax…

Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…

A: Earnings per share of the company means how much a single equity share of the company is earning…

Q: Newtown Propane currently has $645,000 in total assets and sales of $1,720,000. Half of Newtown’s…

A: Calculate the additional assets required as follows: Additional assets required = Assets * Growth…

Q: Pearl Corp. is expected to have an EBIT of $2,000,000 next year. Depreciation, the increase in net…

A: The question is based on the concept of discounting of free cash flow in the company operation. The…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.