Question

In: Finance

1. XYZ Corp. expects the following revenues, cash expenses, and depreciation charges in the future: Year...

1. XYZ Corp. expects the following revenues, cash expenses, and depreciation charges in the future:

Year 1 2 3

Revenues $89,000 $106,000 $145,000

Cost of goods sold $38,000 $ 49,000 $53,000

Selling expenses $11,000 $ 13,000 $14,000 O

ther cash operating expenses $10,000 $ 11,000 $12,000

Depreciation $ 9,500 $ 13,500 $15,000

This business is in the 22 percent tax bracket. Please compute the after-tax cash flows from operations for this investment for each of the years. After-tax operating cash flow for Year 1 25,490 Year 2 28,710 Year 3 54,780 (what I calculated) 2. In addition to the estimates above the business needs 4 percent of revenues as a cash balance, 11 percent of the cost of goods sold as an inventory balance, 6 percent of the cost of goods sold as an accounts payable balance, and 5 percent of revenues as accrued expenses balance. All these balances would be needed at the beginning of each year and are estimated from the year-end annual estimates of revenues and cash expenses given above. The business will end at the end of year 2 and all working capital balances will be collected (or realized) at their face value. Please calculate the incremental investment in working capital needed for years 0,1,2 and 3, and then recalculate the cash flows for XYZ Corp. investment. Incremental investment in working capital Year 0___________Year 1___________ Year 2___________Year 3_________ Recalculated cash flows from operations Year 0___________Year 1___________ Year 2____________Year 3_________ I need question two answered I already provided what I got for q1

Solutions

Expert Solution


Related Solutions

Revenues −Manufacturing Expenses −Marketing Expenses −Depreciation Year 0 Years 1 to 10 3.9 −0.5 −0.15 −0.4...
Revenues −Manufacturing Expenses −Marketing Expenses −Depreciation Year 0 Years 1 to 10 3.9 −0.5 −0.15 −0.4 ​=EBIT −Taxes ​(40%) 2.85 −1.14 ​=Unlevered net income ​+Depreciation −Additions to Net Working Capital −Capital Expenditures −7 1.71 ​+0.4 −0.4 ​=Free Cash Flow 1.71 Panjandrum​ Industries, a manufacturer of industrial​ piping, is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems. It has made the above estimates of free cash flows resulting from such a decision​ (all...
Year 1 Year 2 Revenues 128.9 151.6 COGS and Operating Expenses (other than depreciation) 49.6 52.7...
Year 1 Year 2 Revenues 128.9 151.6 COGS and Operating Expenses (other than depreciation) 49.6 52.7 Depreciation 24.9 43.5 Increase in Net Working Capital 3.4 8.1 Capital Expenditures 27.3 43.2 Marginal Corporate Tax Rate 35% 35% a. What are the incremental earnings for this project for years 1 and​ 2?​ (Note: Assume any incremental cost of goods sold is included as part of operating​ expenses.) b. What are the free cash flows for this project for years 1 and​ 2?...
Year 1 Year 2 Revenues 120.8 150.6 COGS and Operating Expenses​ (other than​ depreciation) 46.1 54.5...
Year 1 Year 2 Revenues 120.8 150.6 COGS and Operating Expenses​ (other than​ depreciation) 46.1 54.5 Depreciation 24.9 32.9 Increase in Net Working Capital 2.8 8.2 Capital Expenditures 29.2 38.4 Marginal Corporate Tax Rate 35​% 35​% a. What are the incremental earnings for this project for years 1 and​ 2?​ (Note: Assume any incremental cost of goods sold is included as part of operating​ expenses.) b. What are the free cash flows for this project for years 1 and​ 2?
Year 1 Year 2 Revenues 126.1126.1 155.6155.6 COGS and Operating Expenses​ (other than​ depreciation) 36.236.2 57.157.1...
Year 1 Year 2 Revenues 126.1126.1 155.6155.6 COGS and Operating Expenses​ (other than​ depreciation) 36.236.2 57.157.1 Depreciation 28.128.1 39.139.1 Increase in Net Working Capital 2.32.3 8.68.6 Capital Expenditures 28.528.5 37.637.6 Marginal Corporate Tax Rate 3535​% 3535​% a. What are the incremental earnings for this project for years 1 and​ 2?​ (Note: Assume any incremental cost of goods sold is included as part of operating​ expenses.) b. What are the free cash flows for this project for years 1 and​ 2?...
Champagne, Inc., had revenues of $14 million, cash operating expenses of $9.5 million, and depreciation and...
Champagne, Inc., had revenues of $14 million, cash operating expenses of $9.5 million, and depreciation and amortization of $1.6 million during 2018. The firm purchased $650,000 of equipment during the year while increasing its inventory by $450,000 (with no corresponding increase in current liabilities). The marginal tax rate for Champagne is 30 percent. What is Champagne's cash flow from operations for 2018? What is Champagne's free cash flow for 2018?
The assets and liabilities of Julius corp as of December 31,2019, and revenues and expenses for...
The assets and liabilities of Julius corp as of December 31,2019, and revenues and expenses for the year ended on that date follow: Land $98,000 Property tax expense $5,000 Note payable (due 2025) 95,000 Accounts receivable 25,000 Accounts payable 21,000 Advertising expense 10,000 Rent expense 3,000 Building 140,000 Cash 10,000 Salary expense 85,000 Common shares 75,000 Salary payable 12,000 Furniture 20,000 Service revenue 200,000 Interest expense 4,000 Supplies 3,000 Beginning retained earnings were $50,000, and dividends totalled $50,000 for the...
Seashore Corp. estimates their future free cash flows as followed: Year 1: $10,000; Year 2: $11,600;...
Seashore Corp. estimates their future free cash flows as followed: Year 1: $10,000; Year 2: $11,600; Year 3: $12,000; and they expect a 5% growth rate beyond year 3. If the required rate of return is 14%: 26) What is their terminal value in Year 3? A.) $140,000 B.) $133,333 C.) $152,000 D.) $120,293 What is a fair stock price per share of Seashore Corp. if they have $57,000 in debt and 2,400 shares outstanding? A.) $41.93 B.) $34.58 C.)...
Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses...
Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses are estimated to be $25,000 per year. The cost of the project equipment is $120,000, and the equipment’s estimated salvage value at the end of the project is $10,000. The equipment’s $120,000 cost will be depreciated on a straight-line basis to $0 over an 8-year estimated economic life. Assume that the project requires an initial $10,000 working capital investment. The company can recover this...
Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses...
Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses are estimated to be $25,000 per year. The cost of the project equipment is $120,000, and the equipment’s estimated salvage value at the end of the project is $10,000. The equipment’s $120,000 cost will be depreciated on a straight-line basis to $0 over an 8-year estimated economic life. Assume that the project requires an initial $10,000 working capital investment. The company can recover this...
The ABC Partnership has the following revenues and expenses for the past year: Sales $430,000 Cost...
The ABC Partnership has the following revenues and expenses for the past year: Sales $430,000 Cost of Goods Sold 218,000 Gross Profit 212,000 Operating Expenses 142,000 Net Income $70,000 The three owners are Albert, Bob, and Clay. Their capital accounts at the beginning of the year were as follows: Albert $30,000 Bob 20,000 Clay 50,000 Albert invested an additional $5,000 in the business on june 30th. During the year the three partners each withdrew the following amounts: Albert $12,000 Bob...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT