You are the head of the acquisitions department of a company. The potential investment in a...

  

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You are the head of the acquisitions department of a company. The potential investment in a steel manufacturing company, Steel Co., is currently under review. Below is some information about the projections. Growth rate estimation. EBIT A Assets A Operating liabilities Number of outstanding shares Current share price Net debt WACC Inflation Effective tax rate Terminal growth rate Terminal date 27,250 $20.91 $240,000 8% 3% 40% 3% Year 6 Year 2 5% $203,700 $115,000 $34,500 Year 3 3% $157,400 $102,000 $34,500 Year 4 2% $131,000 $83,200 $26,000 Year 5 4% $133,000 $38,000 $9,100 Year 6 5% $138,300 $38,900 $9,300 After Year 6 3% $140,000 $40,200 $9,600 Extract from the reformatted income statement Tons of steel sold Selling price per ton Cost price per ton Sales Cost of goods sold Gross profit Sales, general, and admin costs Operating expenses EBIT Accounts receivable Inventory Other current assets Ending PPE (net) Total assets Accounts payable Other current liabilities Year 0 Long-term operating liabilities Capital Liabilities and owner's equity 26,000 $630 $540 Extract from the reformatted balance sheet $16,380,000 $14,040,000 $2,340,000 -$234,000 -$1,962,000 $144,000 Year 0 $1,723,400 $2,480,000 $6,222,050 $5,078,650 $15,504,100 $776,809 $5,825,971 $3,941,020 $4,960,300 $15,504,100 Year 1 33,100 $620 $545 $20,522,000 $18,039,500 $2,482,500 -$248,250 -$2,040,250 $194,000 Year 1 $2,241,000 $3,462,000 $5,100,860 $5,093,140 $15,897,000 $1,042,146 $5,284,134 $3,942,420 $5,628,300 $15,897,000 Answer the following questions based on this information in the corresponding answer tabs provided: Calculate a five-year free cash flow for Steel Co., starting from Year 2. Free cash flow projection EBIT Effective tax rate After-tax EBIT Adjustments: MINUS A Assets PLUS A Operating liabilities Free cash flow Year 2 Year 3 Year 4 Year 5 Year 6 After Year 6 You are the head of the acquisitions department of a company. The potential investment in a steel manufacturing company, Steel Co., is currently under review. Below is some information about the projections. Growth rate estimation. EBIT A Assets A Operating liabilities Number of outstanding shares Current share price Net debt WACC Inflation Effective tax rate Terminal growth rate Terminal date 27,250 $20.91 $240,000 8% 3% 40% 3% Year 6 Year 2 5% $203,700 $115,000 $34,500 Year 3 3% $157,400 $102,000 $34,500 Year 4 2% $131,000 $83,200 $26,000 Year 5 4% $133,000 $38,000 $9,100 Year 6 5% $138,300 $38,900 $9,300 After Year 6 3% $140,000 $40,200 $9,600 Extract from the reformatted income statement Tons of steel sold Selling price per ton Cost price per ton Sales Cost of goods sold Gross profit Sales, general, and admin costs Operating expenses EBIT Accounts receivable Inventory Other current assets Ending PPE (net) Total assets Accounts payable Other current liabilities Year 0 Long-term operating liabilities Capital Liabilities and owner's equity 26,000 $630 $540 Extract from the reformatted balance sheet $16,380,000 $14,040,000 $2,340,000 -$234,000 -$1,962,000 $144,000 Year 0 $1,723,400 $2,480,000 $6,222,050 $5,078,650 $15,504,100 $776,809 $5,825,971 $3,941,020 $4,960,300 $15,504,100 Year 1 33,100 $620 $545 $20,522,000 $18,039,500 $2,482,500 -$248,250 -$2,040,250 $194,000 Year 1 $2,241,000 $3,462,000 $5,100,860 $5,093,140 $15,897,000 $1,042,146 $5,284,134 $3,942,420 $5,628,300 $15,897,000 Answer the following questions based on this information in the corresponding answer tabs provided: Calculate a five-year free cash flow for Steel Co., starting from Year 2. Free cash flow projection EBIT Effective tax rate After-tax EBIT Adjustments: MINUS A Assets PLUS A Operating liabilities Free cash flow Year 2 Year 3 Year 4 Year 5 Year 6 After Year 6