Question
In: Finance
Year 0 1 Revenue 600.00 Fixed costs 100.00 Variable costs 200.00 Additional investment in NWC 10.00...
| Year | 0 | 1 | |
| Revenue | 600.00 | ||
| Fixed costs | 100.00 | ||
| Variable costs | 200.00 | ||
| Additional investment in NWC | 10.00 | ||
| Additional investment in operating long-term assets | 70.00 | ||
| Depreciation | 60.00 | ||
| Interest expenses | 35.00 | ||
| Newly issued debt | 25.00 | ||
| Principle repayments | 15.00 | ||
| Tax rate | 0.40 | ||
| Market value of the firm: | |||
| Price per share | No. of shares | Market value | |
| Short-term debt | 100.00 | ||
| Long-term debt | 600.00 | ||
| Preferred stock | 10.00 | 10 | 100.00 |
| Common stock, equity | 18.00 | 100 | 1,800.00 |
| Total | 2,600.00 | ||
| Cost of equity (Rs) | 0.1500 |
| Growth rate per year from year 1 through year 5 | 0.10 |
| Growth rate after year 5 | 0.07 |
What is the price per share according to the equity free cash flow model?
Select one:
a. $12.33
b. $18.29
c. $15.51
d. $20.87
e. $10.98
Solutions
Expert Solution
Here we are calculating the profit after tax first and then FCFE
The answer is option D
jeff jeffy answered 1 year agoRelated Solutions
Year 0 1 Revenue 600.00 Fixed costs 100.00 Variable costs 200.00 Additional investment in NWC 10.00...
Year
0
1
Revenue
600.00
Fixed costs
100.00
Variable costs
200.00
Additional investment in NWC
10.00
Additional investment in operating long-term assets
70.00
Depreciation
60.00
Interest expenses
35.00
Newly issued debt
25.00
Principle repayments
15.00
Tax rate
0.40
Market value of the firm:
Price per share
No. of shares
Market value
Short-term debt
100.00
Long-term debt
600.00
Preferred stock
10.00
10
100.00
Common stock, equity
18.00
100
1,800.00
Total
2,600.00
Cost of equity (Rs)
0.1500
Growth rate per year from...
A five-year project has an initial fixed asset investment of $310,000, an initial NWC investment of...
A five-year project has an initial
fixed asset investment of $310,000, an initial NWC investment
of $30,000, and an annual OCF of
-$29,000. The fixed asset is fully depreciated over the life
of the project and has no salvage
value. If the required return is 11 percent, what is this
project’s equivalent annual cost, or
EAC?
A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of...
A five-year project has an initial fixed asset investment of
$275,000, an initial NWC investment of $23,000, and an annual OCF
of −$22,000. The fixed asset is fully depreciated over the life of
the project and has no salvage value. If the required return is 10
percent, what is this project’s equivalent annual cost, or EAC? (A
negative answer should be indicated by a minus sign. Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g.,...
A five-year project has an initial fixed asset investment of $265,000, an initial NWC investment of...
A five-year project has an initial fixed asset investment of
$265,000, an initial NWC investment of $21,000, and an annual OCF
of −$20,000. The fixed asset is fully depreciated over the life of
the project and has no salvage value. If the required return is 12
percent, what is this project’s equivalent annual
cost, or EAC? (A negative answer
should be indicated by a minus sign. Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g.,...
A five-year project has an initial fixed asset investment of $260,000, an initial NWC investment of...
A five-year project has an initial fixed asset investment of
$260,000, an initial NWC investment of $20,000, and an annual OCF
of -$19,000. The fixed asset is fully depreciated over the life of
the project and has no salvage value.
If the required return is 10%, what is this project's equivalent
annual cost, or EAC?
A five-year project has an initial fixed asset investment of $325,000, an initial NWC investment of...
A five-year project has an initial fixed asset investment of
$325,000, an initial NWC investment of $33,000, and an annual OCF
of -$32,000. The fixed asset is fully depreciated over the life of
the project and has no salvage value. If the required return is 11
percent, what is this project’s equivalent annual cost, or EAC?
(Negative amount should be indicated by a
minus sign. Do not round intermediate calculations
and round your answer to 2 decimal places, e.g.,
32.16.)
Calculating EAC A five-year project has an initial fixed asset investment of$8,200,000, an initial NWC investment...
Calculating EAC
A five-year project has an initial fixed asset investment
of$8,200,000, an initial NWC investment of $752,000 and an annual
OCF of $1,120,000.The fixed asset is fully depreciated over the
life of the project and has no salvagevalue. If the required return
is 15 percent, what is this project’s equivalent annualcost, or
EAC?
A project generates $7,000 in revenue each year. It has the following costs: fixed cost:$1,200/year variable...
A project generates $7,000 in revenue each year. It has the
following costs:
fixed cost:$1,200/year
variable cost: 65%of revenue
depreciation: $400/year
A) If sales increases by 20%, what will be the increase in
pretax profits? (Hint: Calculate the base case pretax first then
apply the sales growth)
B) What is the degree of operating leverage (DOL) for this
project?
No of units Fixed costs Total variable costs Total Costs Total Sales 0 15,000 0 15,000 ...
No of units Fixed costs Total variable
costs Total Costs Total Sales
0 15,000 0 15,000
0
50 15,000 10,500
25,500 15,000
100 15,000 21,000
36,000 30,000
150 15,000 31,500
46,500 45,000
200 15,000 42,000
57,000 60,000
250 15,000 52,500
67,500 75,000
300 15,000 63,000
78,000 90,000
Create a CVP graph.
A resort hotel annual sales revenue of $1,000,000, Variable costs of $350,000, and a fixed costs...
A resort hotel annual sales revenue of $1,000,000, Variable
costs of $350,000, and a fixed costs of $570,000. The fixed costs
include $80,000 a year for land rental lease.
a) Calculate the hotel's breakeven point.
b) If the owners had an equity investment in the hotel of
$1,200,000. What level of sales revenue is required for an
operating income (BT) representing a 15% return on their
investment?
c). In a renegotiation of the land lease, the landowner has
offered management...
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