China Gold Mining produces and markets gold. The following are selected numbers from the financial statements...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
China Gold Mining produces and markets gold. The following are selected numbers from the financial statements for 2019 and 2020 (in millions). Revenues (Less) Operating Expenses (Less) Depreciation = EBIT = (Less) Interest Expenses (Less) Taxes = Net Income Working Capital Total Debt 2019 2020 $8,494.0 $9,000.0 ($6,424.0) ($6,970.0) ($872.0) ($860.0) $1,198.0 $1,170.0 ($510.0) ($515.0) ($362.0) ($420.0) $326.0 $235.0 ($45.0) ($50.0) $5.45 billion $5.00 billion The firm had capital expenditures of $950 million in 2019 and $1 billion in 2020. The working capital in 2018 was $190 million, and the total debt outstanding in 2018 was $5.75 billion. There were 300 million shares outstanding, trading at $25 per share. A. Estimate the cash flows to equity in 2019 and 2020. B. Assuming that net income and the expenditure increase 4%, and that working capital remains unchanged in 2021, estimate the projected cash flows to equity in 2021. (The firm is assumed to be at its optimal financial leverage.) C. How would your answer in (B) change if the firm planned to reduce its debt ratio to zero in 2021 by financing 100% of its capital expenditures (net of depreciation) with new equity issues? China Gold Mining produces and markets gold. The following are selected numbers from the financial statements for 2019 and 2020 (in millions). Revenues (Less) Operating Expenses (Less) Depreciation = EBIT = (Less) Interest Expenses (Less) Taxes = Net Income Working Capital Total Debt 2019 2020 $8,494.0 $9,000.0 ($6,424.0) ($6,970.0) ($872.0) ($860.0) $1,198.0 $1,170.0 ($510.0) ($515.0) ($362.0) ($420.0) $326.0 $235.0 ($45.0) ($50.0) $5.45 billion $5.00 billion The firm had capital expenditures of $950 million in 2019 and $1 billion in 2020. The working capital in 2018 was $190 million, and the total debt outstanding in 2018 was $5.75 billion. There were 300 million shares outstanding, trading at $25 per share. A. Estimate the cash flows to equity in 2019 and 2020. B. Assuming that net income and the expenditure increase 4%, and that working capital remains unchanged in 2021, estimate the projected cash flows to equity in 2021. (The firm is assumed to be at its optimal financial leverage.) C. How would your answer in (B) change if the firm planned to reduce its debt ratio to zero in 2021 by financing 100% of its capital expenditures (net of depreciation) with new equity issues?
Expert Answer:
Answer rating: 100% (QA)
A Estimate the cash flows to equity in 2019 and 2020 To estimate the cash flows to equity CFE we need to calculate the free cash flows to the firm FCFF first and then adjust for the net borrowing or r... View the full answer
Related Book For
Accounting for Governmental and Nonprofit Entities
ISBN: 978-1259917059
18th edition
Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely
Posted Date:
Students also viewed these finance questions
-
If total assets decreased by $52,526 during a period of time and stockholders' equity increased by $29,765 during the same period, then the amount and direction (increase or decrease) of the period's...
-
Perez Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $16,470,000; it...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
5 Question 42 (2.5 points) Consider a put option that gives the long position the right to sell the underlying asset for $12.34 in 5.67 years. The continuously compounded risk free rate of interest...
-
What is the energy of photons (joules) emitted by an 88.5-MHz FM radio station?
-
Night Shades, Incorporated, manufactures biotech sunglasses. The variable materials cost is $ 1 2 . 2 0 per unit, and the variable labor cost is $ 6 . 0 0 per unit. a . What is the variable cost per...
-
Describe the objectives of tort law.
-
We know that fast shipping is important to our customers, and marketing a shorter ship time on a product page can significantly increase the likelihood of a customer purchasing that product. 1. Name...
-
Given the following information, and using the VC method of valuation, determine the % of the company that needs to be given up for $1.5 m investment. Required ROR by investor(s): 25% Net income in...
-
4. The table below shows the daily closing values of the S&P 500 index, along with the daily prices for the S&P 500 futures contract with maturity date October 29 of the same year. The futures...
-
A spider spins a fine thread of spider silk between two posts a distance Lo apart. The thread has a diameter of d = 5 x 10-6 m and an equilibrium length of Lo. When the spider (with mass m = 2 mg)...
-
What distinguishes intellectual property from other types of property, such as land, buildings, and inventory? Provide several examples of intellectual property and describe their importance to a...
-
What is a firms product/market scope? Why is the concept of product/market scope important in regard to crafting a successful business model?
-
Identify the nontraditional barriers to entry that are particularly suitable for entrepreneurial firms.
-
What is meant by the term business model blind spot? Provide an original example of a firm that suffered as the result of having a business model blind spot.
-
How does the threat of new entrants have the potential to suppress an industrys profitability?
-
Use variation of parameters to find a particular solution of y'' + 16y=tan(4x) -cos(4x). In(|sec (4x) + tan(4x)|) 16 X
-
2. In the circuit given in Figure 2, i,(t) = 5.67cos(5t)A and v (t) = 70.71 cos(5t 60) V a) Find the equivalent load impedance. State whether the load is inductive or capacitive. b) Calculate the...
-
Identify the fund balance classifications and give an example of what might be included in each classification identified.
-
Which standard-setting bodies have responsibility for establishing accounting and reporting standards for (1) state and local governments, (2) business organizations. (3) not-for-profit...
-
Following are descriptions of several relationships between primary governments and other organizations. Required Using just the information provided, indicate whether you believe the primary...
-
(a) In Figure 23.14, what is the direction of the force \(\sum \vec{F}^{E}\) exerted on a particle carrying a charge \(+q\) and placed at \(\mathrm{P}_{1}\) ? (b) How does \(\sum \vec{F}^{E}\) change...
-
A water droplet carrying a positive charge is released from rest in a uniform horizontal electric field near Earth's surface. The horizontal electric force is comparable in magnitude to the...
-
(a) What effect does the torque caused by the electric field have on the electric dipole in Figure 23.17? (b) Is the torque the same for every orientation of the molecule? Figure 23.17 Extended...
Study smarter with the SolutionInn App