What is the adjusted cash flow from asset in 2018? What is the predicted adjusted cash flow from asset in 2019? In 2018, MC Inc. has an EBIT of $125M, and $15M of depreciation. The tax rate is 40%. The net capital spending is $20M. Thenet working capital is $20M in 2018, and $40M in 2017. The predicted growth rate is 10% in the next three years. Starting inthe fourth year, the growth rate will be 5% indefinitely. The firm has $40OM (market value) in debt, and 100M sharesoutstanding. Beta of MC Inc. is 1.5. Market risk premium is 7%. Risk free rate is 5%. The WACC of the firm is 10%.

Adjusted cashflow (ACF) or net cashflow is the net earnings of the firm after deducting all cash…

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What is the adjusted cash flow from asset in 2018? What is the predicted adjusted cash flow from asset in 2019?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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Question

What is the adjusted cash flow from asset in 2018?

What is the predicted adjusted cash flow from asset in 2019?

In 2018, MC Inc. has an EBIT of $125M, and $15M of depreciation. The tax rate is 40%. The net capital spending is $20M. The
net working capital is $20M in 2018, and $40M in 2017. The predicted growth rate is 10% in the next three years. Starting in
the fourth year, the growth rate will be 5% indefinitely. The firm has $40OM (market value) in debt, and 100M shares
outstanding. Beta of MC Inc. is 1.5. Market risk premium is 7%. Risk free rate is 5%. The WACC of the firm is 10%.

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