You have been provided with the following information about company ABC Inc. After-tax operating income...

 

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You have been provided with the following information about company ABC Inc. • After-tax operating income in 2020 was $30m, ABC facing a corporate tax rate of 20% • Capex was $18m and depreciation $6m • The non-cash working capital increased by $4m during the course of 2020 Assume that the after-tax operating income, capital expenditures, depreciation and non-cash working capital all are expected to grow 6% a year for the next 3 years. After year 3 you expect the growth rate to drop to 2% and you anticipate the ROC to be stable at the same level that the firm maintained during the 3-year high growth period. The cost of capital in both the high growth phase and steady state is expected to be 7%. 1. (1.5 points) Estimate the FCFF for the next 3 years. 2. (0.5 point) Estimate the reinvestment rate. 3. (1.5 points) Estimate the terminal value. 4. (1.5 points) Estimate the value per share today if the firm has $20m cash balance, $70m in debt and 20m of shares outstanding. You have been provided with the following information about company ABC Inc. • After-tax operating income in 2020 was $30m, ABC facing a corporate tax rate of 20% • Capex was $18m and depreciation $6m • The non-cash working capital increased by $4m during the course of 2020 Assume that the after-tax operating income, capital expenditures, depreciation and non-cash working capital all are expected to grow 6% a year for the next 3 years. After year 3 you expect the growth rate to drop to 2% and you anticipate the ROC to be stable at the same level that the firm maintained during the 3-year high growth period. The cost of capital in both the high growth phase and steady state is expected to be 7%. 1. (1.5 points) Estimate the FCFF for the next 3 years. 2. (0.5 point) Estimate the reinvestment rate. 3. (1.5 points) Estimate the terminal value. 4. (1.5 points) Estimate the value per share today if the firm has $20m cash balance, $70m in debt and 20m of shares outstanding.

Answer rating: 100% (QA)

To estimate the FCFF Free Cash Flow to the Firm reinvestment rate terminal value and value per share today for company ABC Inc we will calculate the v... View the full answer