Fundamentals of Corp. Fin. (Looseleaf)(Custom)
15th Edition
ISBN: 9781269945646
Author: Berk
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 2CQ
Use the following spreadsheet to project Idexo’s working capital needs over the next five years. Why is the increase in net working capital negative in 2017? Why does the increase in net working capital decline from 2017 to 2018?
| 1 | Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| 2 | Working Capital ($000s) | ||||||
| 3 | Assets | ||||||
| 4 | Accounts Receivable | 20,000 | |||||
| 5 | Inventories | 8,219 | |||||
| 6 | Minimum Cash Balance | 8,219 | |||||
| 7 | Total Current Assets | 36,438 | |||||
| 8 | Liabilities | ||||||
| 9 | Accounts Payable | 6,205 | |||||
| 10 | Net Working Capital | 30,233 | |||||
| 11 | Increase in Net Working Capital |
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The following table tracks the main components of working capital over the life of a four-year project.
2021
2022
2023
2024
2025
Accounts receivable
0
174,000
249,000
214,000
0
Inventory
87,000
142,000
142,000
107,000
0
Accounts payable
31,000
56,000
62,000
41,000
0
Calculate net working capital and the cash inflows and outflows due to investment in working capital.
Based on the investor expectations of earning at least 12%, should this projected below be completed?
Year 0 1 2 3 4 5 6
Cash Flow (133,000) 37,000 42,750 44,000 46,500 82,500 77,000
Please explain why or why not the company should move forward with this endeavor.
ssume that today is December 31, 2018, and that the following information applies to Abner Airlines:
After-tax operating income [EBIT(1 - T)] for 2019 is expected to be $500 million. The depreciation expense for 2019 is expected to be $180 million. The capital expenditures for 2019 are expected to be $400 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 6% per year. The required return on equity is 15%. The WACC is 10%. The firm has $200 million of non-operating assets. The market value of the company's debt is $3.096 billion. 340 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.
$
Chapter 20 Solutions
Fundamentals of Corp. Fin. (Looseleaf)(Custom)
Ch. 20 - Prob. 1CCCh. 20 - 2. What is the effect of seasonalities on...Ch. 20 - Prob. 3CCCh. 20 - Prob. 4CCCh. 20 - Prob. 5CCCh. 20 - Prob. 6CCCh. 20 - Prob. 7CCCh. 20 - Prob. 8CCCh. 20 - Prob. 9CCCh. 20 - Prob. 10CC
Ch. 20 - Based on the forecasts in this case, use the...Ch. 20 - Use the following spreadsheet to project Idexo’s...Ch. 20 - Based on the forecasts you have already developed,...Ch. 20 - Prob. 4CQCh. 20 - Prob. 5CQCh. 20 - Prob. 1CTCh. 20 - Prob. 2CTCh. 20 - Which of the following companies are likely to...Ch. 20 - Prob. 4CTCh. 20 - Prob. 5CTCh. 20 - Prob. 6CTCh. 20 - Prob. 7CTCh. 20 - What is the difference between evergreen credit...Ch. 20 - Prob. 9CTCh. 20 - Prob. 10CTCh. 20 - Prob. 11CTCh. 20 - Prob. 1PCh. 20 - Prob. 2PCh. 20 - Prob. 3PCh. 20 - The following table includes quarterly working...Ch. 20 - Prob. 5PCh. 20 - Prob. 6PCh. 20 - Prob. 7PCh. 20 - Hand-to-Mouth (H2M) is currently cash-constrained,...Ch. 20 - Prob. 9PCh. 20 - Prob. 10PCh. 20 - Prob. 11PCh. 20 - Prob. 12PCh. 20 - Prob. 13PCh. 20 - Prob. 14PCh. 20 - Prob. 15PCh. 20 - Prob. 16PCh. 20 - The Rasputin Brewery is considering using a public...Ch. 20 - Prob. 18P
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