The Financial Manager of Taxco Co. prepared forecasted financial data for the next year. Is the strategy feasible for Company? If not, how much additional capital is needed to ensure the feasibility of the strategy (please prepare pro forma financial statement: P&L (3 point), CF statement (9 points) -  Balance Sheet (6 points)).  Please estimate also the value of equity of  the company using FCFF and assuming that the company will be able to increase FCFF by 4000 in the year 2018 repeat the forecasted FCFF from year 2018 in the foreseeable future (perpetuity, i.e. g = 0). Please use WACC equals 10% for the valuation (7 points). Students who will also prepare valuation using EVA method will receive additional

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Assets Fixed assets Current assets Inventories Accounts receivable 2014 (F) 11 233 7466 1 000 2 222 Cash 4 244 Total assets 18 699 Liabilities and equity Common Stock Capital surplus/ Accum. Retain earning Net income Long-term debt Accounts payable Total liabilities and stockholder's equity Forecast 2014 (F) 10 000 1 233 1 321 5 000 1 145 18 699 0 2015 (F) General, and administrative expenses Depreciation Tax rate 5 500 2 000 19% Accounts payable 200 Planned accounts receivable 1 000 Planned inventories 2 000 Aquisition of fixed assets 8 000 Dividends 1 300 Planned operating revenues 29 000 Cost of goods sold 8 000 Selling costs 3 000 Assets Fixed assets Current assets Inventories Accounts receivable 2014 (F) 11 233 7466 1 000 2 222 Cash 4 244 Total assets 18 699 Liabilities and equity Common Stock Capital surplus/ Accum. Retain earning Net income Long-term debt Accounts payable Total liabilities and stockholder's equity Forecast 2014 (F) 10 000 1 233 1 321 5 000 1 145 18 699 0 2015 (F) General, and administrative expenses Depreciation Tax rate 5 500 2 000 19% Accounts payable 200 Planned accounts receivable 1 000 Planned inventories 2 000 Aquisition of fixed assets 8 000 Dividends 1 300 Planned operating revenues 29 000 Cost of goods sold 8 000 Selling costs 3 000

Answer rating: 100% (QA)

To determine if the strategy is feasible for Taxco Co we will first prepare a pro forma income state... View the full answer