Zeebadee Inc. wants to forecast free cash flow to equity (FCFE) using the percent-of-sales method. Prior...

Zeebadee Inc. wants to forecast free cash flow to equity (FCFE) using the percent-of-sales method. Prior year sales were $10,000.

	Year 1	Year 2	Year 3	Year 4	Year 5
Sales growth	8.00%	14.00%	12.00%	10.00%	6.00%
Profit margin	8.00%	10.00%	12.00%	12.00%	11.00%
Net FCInv (% of Sales)	8.00%	8.00%	8.00%	6.00%	3.00%
WCInv (% of Sales)	3.00%	3.00%	3.00%	2.00%	1.00%
DR	30.00%	30.00%	30.00%	30.00%	30.00%

What is net borrowing in Year 4?
1. $364.04
2. $386.66
3. $406.30
4. $455.05

What is FCFE in Year 5?
1. $970.78
2. $1,005.47
3. $1,224,62
4. $1,318.44

Solutions

Expert Solution

Q1)

Net borrowings for year 4 is a)$364.04

The same with Excel formulas shown:

Q2)

FCFE in year 5 is d)$1,318.44

jeff jeffy answered 1 year ago

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