The valuation assumptions about FBE Inc. are provided as follows, where the assumptions for 2019 as...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The valuation assumptions about FBE Inc. are provided as follows, where the assumptions for 2019 as extracted from published financial statements and the assumption for 2020 is forecast. 2019 2020F Net Profit 25,000 23,000 Working Capital 56,000 52,000 Net long-term operating assets 180,000 190,000 Net Debt 75,000 76,000 8. (1) Forecast free cash flow (FCF) for year 2020. Show your work. (6 mark) (2) Suppose the cost of equity is 6% and assume FCF will grow at a constant rate of 2% beyond 2022. The present value of FCF forecasted in years 2021 and 2022 are given as follows. 2021F 2022F 2019 Present Value of FCF 5,340 8,396 Suppose current market valuation of the equity of FBE Inc.is $300,000. Should we recommend buy or sell of this FBE Inc.'s stock? Show your work. (6 mark) The valuation assumptions about FBE Inc. are provided as follows, where the assumptions for 2019 as extracted from published financial statements and the assumption for 2020 is forecast. 2019 2020F Net Profit 25,000 23,000 Working Capital 56,000 52,000 Net long-term operating assets 180,000 190,000 Net Debt 75,000 76,000 8. (1) Forecast free cash flow (FCF) for year 2020. Show your work. (6 mark) (2) Suppose the cost of equity is 6% and assume FCF will grow at a constant rate of 2% beyond 2022. The present value of FCF forecasted in years 2021 and 2022 are given as follows. 2021F 2022F 2019 Present Value of FCF 5,340 8,396 Suppose current market valuation of the equity of FBE Inc.is $300,000. Should we recommend buy or sell of this FBE Inc.'s stock? Show your work. (6 mark)
Expert Answer:
Answer rating: 100% (QA)
Free cashflow is the cash a company produces through its operations xxx Less The cost of expenditure ... View the full answer
Related Book For
Managerial Accounting A Focus on Ethical Decision Making
ISBN: 978-0324663853
5th edition
Authors: Steve Jackson, Roby Sawyers, Greg Jenkins
Posted Date:
Students also viewed these corporate finance questions
-
Discounted cash flow analysis techniques are used by managers to understand the impact of investment decisions in terms of todays dollars. Two common techniques that use discounted cash flows are net...
-
Chart of Accounts: Young Consulting, Inc. Number Account Name Cash Accounts Receivable Prepaid Rent Office Supplies Computer Supplies Prepaid Insurance Equipment Accumulated Depreciation- Equipment...
-
On the accompanying graph, draw the consumption function C = $200 + 0.75YD. (a) At what level of income do households begin to save? Designate that point on the graph with the letter A. (b) By how...
-
What is the weight of a 1-kg substance in N, kN, kgm/s2, kgf, lbmft/s2, and lbf?
-
The following account balances are taken from Ballistik Ltd.s adjusted trial balance at January 31, 2024: Required a. Prepare a single-step statement of income for the year ended January 31, 2024. b....
-
Consider a flat plate subject to parallel flow (top and bottom) characterized by \(u_{\infty}=5 \mathrm{~m} / \mathrm{s}, T_{\infty}=20^{\circ} \mathrm{C}\). (a) Determine the average convection heat...
-
Joanna takes a security interest in the equipment in Jason Store and files a financing statement claiming equipment and all after acquired equipment. Berkeley later sells Jason Store a cash register...
-
Discuss the principles of affinity-based extraction methods, such as molecularly imprinted polymers (MIPs) and ion-exchange resins, and their applications in selective extraction of target analytes...
-
Find the effective value of the voltage waveform in Fig. 11.57. v(t) LI-LI 0 2 46 8 10
-
Net Perks Co. establishes a $290 petty cash fund on January 1. On January 8, the fund shows $193 in cash along with receipts for the following expenditures: postage, $41; transportation-in, $12;...
-
Which of the following is most accurate with regard to interviewing and interrogation? 1. Interviewing and interrogation are synonymous and are used interchangeably by investigators. 2. Interviewing...
-
Sales of Riding Mowers. A company that manufactures riding mowers wants to identify the best sales prospects foran intensive sales campaign. In particular, the manufacturer is interested in...
-
How can you decide on the number of independent variables and that adding one more would improve the predictability of the dependent variable?
-
What were the names of the marketing efforts that helped drive the need to channel stuff?
-
Was channel stuffing the only scheme perpetrated by Bristol Myers? If the answer is no, name one other scheme.
-
A taxpayer receives dividend income of $400, which includes $200 of qualified dividend income. They are also in the 0% capital gains tax bracket. How much of the dividend income is taxable as...
-
A copper sphere of 10-mm diameter, initially at a prescribed elevated temperature T;, is quenched in a saturated (1 atm) water bath. Using the lumped capacitance method, estimate the time for the...
-
In your opinion, are external forces or internal forces more important in shaping a companys corporate governance system?
-
Boots R Us produces a variety of products for the fashion industry. Cowboy-type boots are among its most popular products. The companys controller spoke to the companys president at a meeting last...
-
Which area of management would normally be responsible for sales price variances? Why?
-
What are the percentages of observations in each of the five job satisfaction categories?
-
If the 146 customer visits is used to estimate the number of appliance department visits at the larger store population, what are the lower and upper limits of this estimate?
-
How many individuals are in each of the five different credit card categories?
Study smarter with the SolutionInn App