Exhibit 6.18 presents the income statement and reorganized balance sheet for BrandCo, an $800 million consumer products company. Using the methodology outlined in Exhibit 6.5, determine NOPLAT for year 1. Assume an operating tax rate of 25 percent. Using the methodology outlined in Exhibit 6.6, determine free cash flow for year 1.
Answer to relevant QuestionsBrandCo currently has 50 million shares outstanding. If BrandCo’s shares are trading at $19.16 per share, what is the company’s market capitalization (value of equity)? Assuming the market value of debt equals today’s ...Using the methodology outlined in Exhibit 6.16, determine equity cash flow for year 1. Use the growing-perpetuity formula (based on equity cash flow) to compute BrandCo’s equity value. Assume the cost of equity is 12 ...Many companies hold significant amounts of excess cash, that is, cash above the amount required for day-to-day operations. Does including excess cash as part of invested capital distort the ROIC upward or downward? Why? Exhibit 9.14 presents the income statement and balance sheet for PartsCo, a $900 million supplier of machinery parts. Next year, the company is expected to grow revenues by 15 percent to $1,035 million. Using the methodology ...A colleague suggests that a 6 percent growth rate is too low for revenue, profit, and cash flow growth beyond year 5. He suggests raising growth to 12 percent in the continuing value. If NOPLAT equals $26.6 million, return ...
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