EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 9781260049237
Author: BREALEY
Publisher: MCGRAW HILL BOOK COMPANY
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 18, Problem 18QP
Summary Introduction
To compute: The required external financing for growth rates at 15%, 20%, and
25%
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
7. Assume that you have full year forecasted financials for 2019 - 2024 (planning period) and the following financials for after the planning period:
• NOPAT (last year of planning period) = 90
• Long term growth rate = 2%
• Long term ROCB = 11%
• WACC = 8%
What is the present value (at December 2018) of the terminal value of this company using the Key Value Driver Formula? Please round your answer to the nearest whole
number and provide your answer in USD millions without a dollar sign (e.g. 100 instead of $100).
ABM Enterprise would like to evaluate/analyze an investment proposal.
Given the following:
Investment amount - 450,000 (2022)
Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for the
succeeding years
Discount rate - 14%
a. NPV for the perio 2023 through 2029;
b. Total NPV using manual computation;
c. Total NPV using the Excel function; and
d. IRR rate.
a) The initial outlay of the investment is €125,000. The income stream is €30,000 in
year 1, €55,000 in year 2, €60,000 in year 3 and €70,000 in year 4. What is the net
present value of the investment at 18% discount rate?
b) What is the IRR of the aforementioned investment?
c) Using the DCF approach requires some forecasting of the future – How canthis.
be done?
Chapter 18 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- ABC Enterprise would like to evaluate/analyze a potential investment.. Given the following:Investment amount - 450,000 (2022)Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for the succeeding years Discount rate - 14%a. NPV for the perio 2023 through 2029;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.arrow_forwarda) The initial outlay of the investment is €125,000. The income stream is €30,000 in year 1, €55,000 in year 2, €60,000 in year 3 and €70,000 in year 4. What is the net present value of the investment at 18% discount rate? b) What is the IRR of the aforementioned investment? c) Using the DCF approach requires some forecasting of the future – How can this. be done?arrow_forwardCurrent and projected free cash flows for Radell Global Operations are shown here. Growth is expected to be constant after 2020, and the weighted average cost of capital is 11%. What is the horizon (continuing) value at 2021 if growth from 2020 remains constant?arrow_forward
- ABC Enterprise would like to evaluate/analyze an investment proposal. Given the following:Investment amount - 450,000 (2022)Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for the succeeding years Discount rate - 14%a. NPV for the period 2023 through 2029;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.EXCEL COMPUTATION AND FORMULAarrow_forwardCompute the Payback Period, Discounted Payback Period, Net Present Value, Internal Rate of Return, and Productivity Index of all four alternatives based on cash flow. use 10 percent for the cost of capital in the calculations. For the Payback Period and for the Discounted Payback Period, compute to the midyear points. ALL Information is in the PNGs!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!arrow_forwardNet Income for Company A is $200,000 in 2014, $300,000 in 2015, $400,000 in 2016, $500,000 in 2017, and $600,000 in 2018. The expected growth for all years after 2018 is 5%, the 90-Day T-Bill Rate is 20%, and the appropriate percentage above risk-free rate is 12%. Using this information, what is the appropriate discount rate? A. O.32 B. 0.02arrow_forward
- You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year Group of answer choices a. $17.6 bn, year 5 b. $17.0 bn, year 6 c. $10.0 bn, year 5 d. $17.6 bn, year 6arrow_forwardAssuming a 1-year, money market account investment at 4.97 percent (APY), a 2.96% inflation rate, a 28 percent marginal tax bracket, and a constant $50,000 balance, calculate the after-tax rate of return, the real return, and the total monetary return. What are the implications of this result for cash management decisions? Assuming a 1-year, money market account investment at 4.97 percent (APY), a 28 percent marginal tax bracket, and a constant $50,000 balance the after-tax rate of return is %. (Round to two decimal places.)arrow_forwardConsider the following information for Smart Products: total assets P1000; sales-P1540; net profit margin-12%; dividend payout ratio=40%; accounts payable=P308. If sales are forecast to increase 30%, the "short cut" estimate of external funds required (EFR) would be P________?arrow_forward
- Assuming a 1-year, money market account investment at 2.51 percent (APY), a 1.1% inflation rate, a 25 percent marginal tax bracket, and a constant $40,000 balance, calculate the after-tax rate of return, the real return, and the total monetary return. What are the implications of this result for cash management decisions?arrow_forwardProfitability index. Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept. What is the PI of project B?(Round to two decimal places.) Cash Flow Project A Project B Year 0 −$1,800,000 −$2,400,000 Year 1 $500,000 $1,200,000 Year 2 $600,000 $1,100,000 Year 3 $700,000 $1,000,000 Year 4 $800,000 $900,000 Year 5 $900,000 $800,000 Discount rate 5% 17%arrow_forward3. The required rate of return, assuming no inflation, is 12%, the sales price of a particular product in a potential project is 6% pa and general inflation is forecast to be 8% pa for the foreseeable future. What rate should be used to discount nominal cashflows? A 18.00% B 18.72% C 20.00% D 20.96%arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Financial Projections for Startups Basic Walkthrough; Author: Mike Lingle;https://www.youtube.com/watch?v=7avegQF4dxI;License: Standard youtube license