Question: I need help getting an explanation and how to input the proper formulas and where to get the info for the following case and answer

I need help getting an explanation and how to input the proper formulas and where to get the info for the following case and answer it on EXCEL! please put formulas

  1. Organic Micros was established 8 years ago by Mary Mendoza. The firm reported EBIT this year of $80,000. Mary typically reports about $2,000 in personal expenses through the firm each year. She also pays herself a salary of $60,000 despite the market rate for such a position being closer to $30,000.
  2. The firm currently reports $10,000 in depreciation expenses every year.
  3. The firm will need $25,000 of inventory replaced in year 1 and will also require the replacement of equipment during year 4 in an amount totaling $50,000.
  4. The firm currently has outstanding debt of $400,000. The firm has been historically financed in a way that 30% of funds are a result of debt financing. The cost of this debt financing is estimated to be 12% while the cost of equity financing is estimated at 22%.
  5. Mary originally invested $120,000 of her own funds in the firm which establishes a cost basis for the firm of $120,000. Mary typically falls in a tax bracket that results in a total tax rate of 40%.
  6. Based on the firm's maturity and the state of the industry, it is estimated the EBIT will increase by 9% each year for the next 5 years. Beyond this time frame,a reasonable estimate of growth is neither possible nor relevant.

I need help getting an explanation and how to
NAME Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Official EBIT Owner's Salary Reasonable Salary Depreciation Personal Expenses Estimated EBITDA New Equipment Inventory Investment Free Cash Flow Current EBIT Weight Of Debt Owner's Salary Weight Of Equity Reasonable Salary Cost Of Debt Depreciation Cost Of Equity Personal Expenses WACC New Equipment Inventory Investment Value Of Firm Estimated Growth Rate Basis Of Firm Tax Rate Gain Taxes Owed Terminal Value Value Of Debt CF1 Net Proceeds CF2 Sell For $900k? CF3 Sell For $700k? CF4 CF5 NPV

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!