2013 2014 Sale $2100 Costs of goods sold $1200 Depreciation expense $225 Interest expense $175 Current assets
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Question:
2013 | 2014 | |
Sale | $2100 | |
Costs of goods sold | $1200 | |
Depreciation expense | $225 | |
Interest expense | $175 | |
Current assets | $1000 | $1300 |
Total fixed assets | $3500 | $4000 |
Accumulated depreciation | $1250 | This can be determined from the information given |
Current liability | $900 | $975 |
Long-term debt | $1500 | $1350 |
Common stock | $400 | This can be determined from the information given |
The average tax rate is 35% and the dividend payout ratio is 65%
OCF = 725
NCS = 500
Change in NWC = 225
FCF = 0
CFC = 325
CFS = - 325
- Use a 20% growth rate and forecast next year’s financial statements assuming the following: sales and cost of goods sold increase at the same rate; interest expense remains the same percentage of long-term debt; depreciation expense remains the same percentage of total fixed assets; current assets, current liabilities, and fixed assets increase at the same rate as sales; no new equity is issued. What is the external financing needed?
- Under the same assumptions as above, forecast the next five years of growth using debt as the plug. Calculate free cash flow for the forecasted years. Does this seem sustainable in the long run?
- If the free cash flows will grow by 3% per year indefinitely after five years have passed and the required return is 15%, what is the “terminal value” of the firm in five years?
- What is the value of the firm today, based on the above?
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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