Tonic Inc. is a manufacturing company. Last year, the company generated $75 million in EBIT. The company also had $50 million in capital expenditures and reported $20 million in depreciation and amortization. Non-cash working capital increased by $7 million. If the tax rate is 25%, what is the reinvestment rate for the company? 

 

Question 2 
lippy Inc. reported a return on capital of 11.5% on its existing assets and a reinvestment rate of 58% in the most recent year. It expects to improve its return on capital to 14.0% next year on both its existing and new investments, while maintaining its existing reinvestment rate. What will the expected growth rate be next year? (First, express your answer in decimals.

 

Question 3 

Twidder Canada Inc. reported the following earnings per share from 2016 to 2021.

Year	EPS
2016	$2.06
2017	$1.40
2018	$2.00
2019	$1.50
2020	$2.25
2021	$3.00

What is the geometric average growth rate in EPS during the period? (First, express your answer in decimal form.

 

 

Question 4 

Sonic Vision Inc. is a manufacturing company. Last year, the company generated $75 million in EBIT. The company also had $50 million in capital expenditures and reported $20 million in depreciation and amortization. Non-cash working capital increased by $7 million. If the tax rate is 25%, what is the reinvestment rate for the company?

 

Question 5

The firm is expected to have after-tax operating earnings of $ 377 million in year 6 and these earnings are expected to grow 5.0% a year in perpetuity. The firm is also expected to have a return on capital of 8% and a cost of capital of 7% in perpetuity. Estimate the terminal value of the firm at the end of year 5 in million dollars. 

Answer rating: 100% (QA)

Finance Questions and Solutions Question 1 Reinvestment Rate for Tonic Inc We can calculate the reinvestment rate RR for Tonic Inc using the following ... View the full answer