Bundle: Fundamentals Of Financial Management, Loose-leaf Version, 15th + Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card
15th Edition
ISBN: 9780357307731
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Textbook Question
Chapter 17, Problem 3P
AFN EQUATION Refer to problem 17-1 and assume that the company had $3 million in assets at the end of 2018. 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 17-1?
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Question 3: Study the following financial statements.
What was NOWC for 2017 and 2018? Show the calculation and circle your answer. Assume that all
cash is excess cash; i.e., this cash is not needed for operating purposes.
Calculate the Free Cash Flow in 2018. Show the calculation and circle your answer.
What was 2018 EVA? Show the calculation and circle your answer. Assume that its after-tax cost of
capital is 10%.
What was MVA at the year-end 2018? Show the calculation and circle your answer. (Note: Share
Price is $25)
An analyst is studying the company LEMO in order to make an investment decision. The
investor's estimates of Free Cash Flows to Firm (FCF), levels of debt and net Financial
Expenses (FE) of the company are presented in Table 1.
Table 1
Year 2020 Year 2021 | Year 2022 | Year 2023
Year 2024
Year 2025
FCF
€10000
€11300
€10950
€12500
€12750
Level
of €1000
€1200
€1450
€1350
€1600
€1675
debt
FE
€70
€90
€100
€108
€115
Additionally, the analyst has made the following assumptions: (i) risk-free interest rate: 1.5
%; (i) target capital structure: debt/(debt + equity) ratio of 45%; (ii) equity risk premium:
6%; (iv) asset beta: 1.15; and (v) tax rate: 20%. The number of shares of the company is 1
2000 and the current market price of LEMO is €8.0 per share. Present your result rounded
to one decimal place.
a. Compute the yearly Equity Free Cash Flows (EFCF) for the period from 2021 until
2025. Explain your answer.
b. Assume the expected nominal growth rate of the EFCF in perpetuity is 1.25%.…
How to solve a problem when they give you the liability amount $120000 and the equity $232k and they ask to fund the total assets?
Chapter 17 Solutions
Bundle: Fundamentals Of Financial Management, Loose-leaf Version, 15th + Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card
Ch. 17 - Prob. 1QCh. 17 - Assume that an average firm in the office supply...Ch. 17 - Would you agree that computerized corporate...Ch. 17 - Certain liability and net worth items generally...Ch. 17 - Suppose a firm makes the following policy changes....Ch. 17 - AFN EQUATION Carlsbad Corporation's sales are...Ch. 17 - AFN EQUATION Refer to problem 17-1. What...Ch. 17 - AFN EQUATION Refer to problem 17-1 and assume that...Ch. 17 - PRO FORMA INCOME STATEMENT Austin Grocers recently...Ch. 17 - EXCESS CAPACITY Williamson Industries has 7...
Ch. 17 - REGRESSION AND INVENTORIES Jasper Furnishings has...Ch. 17 - PRO FORMA INCOME STATEMENT At the end of last...Ch. 17 - LONG-TERM FINANCING NEEDED At year-end 2018, total...Ch. 17 - SALES INCREASE Paladin Furnishings generated 4...Ch. 17 - REGRESSION AND RECEIVABLES Edwards Industries has...Ch. 17 - REGRESSION AND INVENTORIES Charlie's Cycles Inc....Ch. 17 - EXCESS CAPACITY Earleton Manufacturing Company has...
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