You are considering an investment in Ray company, and want to evaluatethe firm's free cash flow. From the income statement, you see that Raycompany earned an EBIT of $62 million, had a tax rate of 21 percent, andits depreciation expense was $6 million. Ray's gross fixed assets increasedby $32 million from 2020 and 2021. The firm's current assets increasedby $24 million and spontaneous current liabilities increased by $14million.Calculate Ray's operating cash flow for 2021. (Enter your answer inmillions of dollars rounded to 2 decimal places.)

Operating Cash flows are the Cash inflows and Cash outflows that result from carrying of business.…

Answered: You are considering an investment in…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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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?
Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $70 million, had a tax rate of 21 percent, and its depreciation expense was $7 million. Fields and Struthers's NOPAT gross fixed assets increased by $36 million from 2020 and 2021. The firm's current assets increased by $32 million and spontaneous current liabilities increased by $18 million. Calculate Fields and Struthers's NOPAT operating cash flow for 2021. Calculate Fields and Struthers's NOPAT investment in operating capital for 2021. Calculate Fields and Struthers's NOPAT free cash flow for 2021.
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm’s free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $84 million, had a tax rate of 21 percent, and its depreciation expense was $10 million. Fields and Struthers's NOPAT gross fixed assets increased by $50 million from 2020 and 2021. The firm’s current assets increased by $38 million and spontaneous current liabilities increased by $25 million. Calculate Fields and Struthers’s NOPAT operating cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.) Calculate Fields and Struthers’s NOPAT investment in operating capital for 2021. (Enter your answer in millions of dollars.) Calculate Fields and Struthers’s NOPAT free cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.)
You have been asked to value Brilliant Enterprises, a publicly traded IT services firm, and have collected the following information: After-tax operating income last year = $100 million Net income last year = $82.5 million Book value of equity at start of this year = $750 million Book value of debt at start of this year = $250 million Capital expenditure last year = $80 million Depreciation last year = $30 million Increase in non-cash working capital last year = $10 million a) Assuming that Brilliant Enterprises will maintain its return on capital and reinvestment rate from last year for the next 3 years, estimate the free cash flow for the company for each of the next 3 years. b) After year 3, Brilliant expects its growth rate to decline to 3% and the return on capital to be 9% in perpetuity. Assuming that its cost of capital is 8%, estimate the terminal value at the end of the third year. c) Assuming that Brilliant has a cost of capital of 10% for the next 3…
As a financial analyst, you have been tasked with evaluating Randy Watson Music's free cash flow. Based on the 2022 income statement, BIT was $41 million, the tax rate was 21 percent, and its depreciation expense was $6 million. NOPAT gross fixed assets increased by $28 million from 2021 and 2022. The company's current assets increased by $18 million and current liabilities increased by $14 million. Calculate the Investment in operating capital (IOC) for 2022.
Tropetech Inc. has an expected net operating profit after taxes, EBIT(1 – T), of $16,300 million in the coming year. In addition, the firm is expected to have net capital expenditures of $2,445 million, and net operating working capital (NOWC) is expected to increase by $50 million. How much free cash flow (FCF) is Tropetech Inc. expected to generate over the next year? $13,805 million $331,476 million $18,695 million $13,905 million
Calculate a firm's free cash flow if it has net operating profit after taxes of P60,000, depreciation expense of P7,000, an interest expense of P1,000, a net fixed asset investment of P30,000, a net current asset requirement of P15,000 and a tax rate of 30%.
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?
Calculate a firm's free cash flow if it has net operating profit after taxes of P60,000, depreciation expense of P10,000, net fixed asset investment requirement of P40,000, a net current asset requirement of P30,000 and a tax rate of 30%
For 2019, Gourmet Kitchen Products reported $21 million of sales and $17 million of operating costs (including depreciabon). The companx has $14 milion af tatal invested capital, Its after-tax cost of capital is 8 J.b and its federal-plus.state income tax rate was. 25% . What was the firm's economic value added (EvA), that is, how much value did management add to stockholders' wealth during 2019 ? Write out your answer completely. For example, 25 million ahould be entered as 25,000,005 Round your answer to the nearest dollar, if necessary.
For 2021, Gourmet Kitchen Products reported $22 million of sales and $19 million of operating costs (including depreciation). The company has $15 million of total invested capital. Its after-tax cost of capital is 10%, and its federal-plus-state income tax rate was 25%. What was the firm's economic value added (EVA), that is, how much value did management add to stockholders' wealth during 2021?

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