Question

In: Finance

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%

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


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