Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Textbook Question
Chapter 16, Problem 3P
AFN EQUATION Refer to problem 16-1 and assume that the company had $3 million in assets at the end of 2016. However, now assume that the company pays no dividends. Under these assumptions, what additional funds would be needed for the coming year? Why is this AFN different from the one you found in problem 16-1?
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Please give a detailed analysis of the financial statements given below for Joshua & White Technologies. Your analysis should include answers to the questions as follows (not limited to these questions):
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Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets
2019
2018
Cash and cash equivalents
$21,000
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Net fixed assets
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$384,356
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Liabilities and equity
Accounts payable
$33,600
$32,000
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12,600
12,000…
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Assume that today is December 31, 2015, and the following information applies to Vermeil Airlines: • After-tax operating income [EBIT(1 T), also called NOPAT] for 2016 is expected to be $500 million.• The depreciation expense for 2016 is expected to be $100 million.• The capital expenditures for 2016 are expected to be $200 million.• No change is expected in net operating working capital.• The free cash flow is expected to grow at a constant rate of 6 percent per year.• The required return on equity is 15 percent.• The WACC is 12 percent.• The market value of the company’s debt is $3.2 billion.• 200 million shares of stock are outstanding.Using the free cash flow approach, what should the company’s stock price be today?
a) Calculate the free cash flow generated by a firm which has earnings before interest and taxes of £30m, has depreciated its fixed assets by £1m, has invested £10m in new fixed assets and £5m in working capital during 2019 when it paid corporate tax at 20%. Explain what you have assumed about the firm’s asset base.
(b) During 2019 the firm in (a) generated revenue of £60m, its cost of goods sold was £20m and its selling, general and administrative costs were £10m. You anticipate that over the next five years revenue will grow at 5% each year, the cost of goods sold will continue to be a fixed percentage of revenue, but due to managerial efficiencies administrative costs will not change. All forms of investment, together with depreciation will have a consistent relationship with revenue. At the end of this five-year period you believe that free cash flow will grow at 2% each year. What is the company worth at the end of 2019, assuming that its weighted average cost of capital is 5%?
Chapter 16 Solutions
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Ch. 16 - Prob. 1QCh. 16 - Assume that an average firm in the office supply...Ch. 16 - Would you agree that computerized corporate...Ch. 16 - Certain liability and net worth items generally...Ch. 16 - Suppose a firm makes the following policy changes....Ch. 16 - AFN EQUATION Carlsbad Corporations sales are...Ch. 16 - AFN EQUATION Refer to problem 16-1. What...Ch. 16 - AFN EQUATION Refer to problem 16-1 and assume that...Ch. 16 - PRO FORMA INCOME STATEMENT Austin Grocers recently...Ch. 16 - EXCESS CAPACITY Williamson Industries has 7...
Ch. 16 - REGRESSION AND INVENTORIES jasper Furnishings has...Ch. 16 - PRO FORMA INCOME STATEMENT At the end of last...Ch. 16 - LONG-TERM FINANCING NEEDED At year-end 2016, total...Ch. 16 - SALES INCREASE Paladin Furnishings generated 4...Ch. 16 - REGRESSION AND RECEIVABLES Edwards Industries has...Ch. 16 - REGRESSION AND INVENTORIES Charlies Cycles Inc....Ch. 16 - EXCESS CAPACITY Earleton Manufacturing Company has...Ch. 16 - ADDITIONAL FUNDS NEEDED Morrissey Technologies...Ch. 16 - EXCESS CAPACITY Krogh Lumbers 2016 financial...Ch. 16 - INTEGRATED CASE NEW WORLD CHEMICALS INC. FINANCIAL...Ch. 16 - Prob. 1DQCh. 16 - Prob. 2DQCh. 16 - Forecast Earnings Growth Have analysts made any...Ch. 16 - Prob. 4DQCh. 16 - How has Abercrombies stock performed this year...
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