Peter Connolly, CFA is analyzing the financial statements of Nova Corp. He has the 2019 income...

 

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Peter Connolly, CFA is analyzing the financial statements of Nova Corp. He has the 2019 income statement and balance sheet, as well as the 2020 income statement, balance sheet, and CFO forecasts. Assume there will be no long-term asset sales in 2020. Calculate 2020 FCFF. Income Statement Sales 2020 Forecast $300 2019 Actual $250 COGS 120 100 SG&A 35 30 Depreciation 50 40 EBIT 95 80 Interest Expense 15 10 EBT 80 70 Taxes (@30%) 24 21 Net Income $56 $49 Balance Sheet 2020 Forecast 2019 Actual Cash $10 $5 Accounts Receivable 30 15 Inventory 40 30 Current Assets 80 50 Gross PP&E 400 300 Accumulated Depreciation (190) (14) Total Assets $290 $210 Accounts Payable $20 $20 Short-Term Debt 20 10 Current Liabilities 40 30 Long-Term Debt 114 100 Common Stock 50 50 114 Common Stock 50 50 Retained Earnings 86 30 Total Liabilities and Equity $290 $10 Cash Flow from Operations Net Income 56 Depreciation 50 WCInv CFO 25 81 Peter Connolly, CFA is analyzing the financial statements of Nova Corp. He has the 2019 income statement and balance sheet, as well as the 2020 income statement, balance sheet, and CFO forecasts. Assume there will be no long-term asset sales in 2020. Calculate 2020 FCFF. Income Statement Sales 2020 Forecast $300 2019 Actual $250 COGS 120 100 SG&A 35 30 Depreciation 50 40 EBIT 95 80 Interest Expense 15 10 EBT 80 70 Taxes (@30%) 24 21 Net Income $56 $49 Balance Sheet 2020 Forecast 2019 Actual Cash $10 $5 Accounts Receivable 30 15 Inventory 40 30 Current Assets 80 50 Gross PP&E 400 300 Accumulated Depreciation (190) (14) Total Assets $290 $210 Accounts Payable $20 $20 Short-Term Debt 20 10 Current Liabilities 40 30 Long-Term Debt 114 100 Common Stock 50 50 114 Common Stock 50 50 Retained Earnings 86 30 Total Liabilities and Equity $290 $10 Cash Flow from Operations Net Income 56 Depreciation 50 WCInv CFO 25 81

Answer rating: 100% (QA)

To calculate the Free Cash Flow to the Firm FCFF for 2020 we use the formula FCFF EBIT x 1 Tax rate ... View the full answer