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Option #2: Case: Electronix Inc. Valuation Electronix Inc. manufactures electronic products. The company's weighted average cost...
Option #2: Case: Electronix Inc. Valuation
Electronix Inc. manufactures electronic products. The company's weighted average cost of capital is 8 percent. The company forecasted the following free cash flows for the next 20 years:
Year Free Cash Flows
1 $15,000,000
2 $16,200,000
3 $21,000,000
4 $23,000,000
5 $27,000,000
6-10 $25,000,000 per year
11-20 $21,000,000 per year
- Prepare a valuation report for Electronix Inc. using the discounted cash flow approach.
- Identify the accounts taken into consideration in the discounted cash flow method.
- Compare the difference between future income method and the discounted future cash flow method.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Williamson, Inc., has a debt–equity ratio of 2.43. The company's weighted average cost of capital is...
Williamson, Inc., has a debt–equity ratio of 2.43. The company's
weighted average cost of capital is 11 percent, and its pretax cost
of debt is 5 percent. The corporate tax rate is 30 percent.
What would the company’s weighted average cost of capital be if
the company's debt–equity ratio were .65 and 1.80? (Do not round
intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
Williamson, Inc., has a debt–equity ratio of 2.54. The company's weighted average cost of capital is...
Williamson, Inc., has
a debt–equity ratio of 2.54. The company's weighted average cost of
capital is 9 percent, and its pretax cost of debt is 7 percent. The
corporate tax rate is 40 percent.
a.
What is the
company’s cost of equity capital? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Cost
of equity capital
%
b.
What is the company’s
unlevered cost of equity capital?...
CASE 2 – COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE AND FIFO METHODS The Company uses a...
CASE 2 – COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE
AND FIFO METHODS
The Company uses a single department production process.
Materials are added at the start of the production process and
labor and overhead are added as indicated. For January 2018, the
Company records have the following information:
UNITS:
Beginning
WIP:
10,000 units
100% complete for materials, 50% complete for labor; 3% complete
for overhead
Units started in
process
50,000 units
Units
completed
49,000 units...
What is “Weighted Average Cost of Capital” and how is it used in equity valuation? Which...
What is “Weighted Average Cost of Capital” and how is it used in
equity valuation?
Which is the better model for valuation when earnings quality is
a major concern, DCF or ROPI? Explain.
Discuss why NOPAT is used in calculating the value of a company
instead of net income in the ROPI equity valuation model.
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
70,000
Pounds started into production during May
350,000
Pounds completed and transferred out
?
Pounds in process, May 31; materials 70% complete;
conversion 30% complete
30,000
Cost data:...
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
66,000
Pounds started into production during May
310,000
Pounds completed and transferred out
?
Pounds in process, May 31; materials 70% complete;
conversion 30% complete
26,000
Cost data:...
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
76,000
Pounds started into production during May
410,000
Pounds completed and transferred out
?
Pounds in process, May 31; materials 60% complete;
conversion 40% complete
36,000
Cost data:...
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
87,000
Pounds started into production during May
520,000
Pounds completed and transferred out
?
Pounds in process, May 31; materials 75% complete;
conversion 25% complete
47,000
Cost data:...
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May: Production data: Pounds in process, May 1; materials
100% complete; conversion 90% complete 81,000 Pounds started into
production during May 460,000 Pounds completed and transferred out
? Pounds in process, May 31; materials 80% complete; conversion 20%
complete 55,000 Cost data:...
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking...
Builder Products, Inc., uses the weighted-average method in its
process costing system. It manufactures a caulking compound that
goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given
below for May:
Production data:
Pounds in process, May 1; materials 100% complete;
conversion 90% complete
64,000
Pounds started into production during May
290,000
Pounds completed and transferred out
?
Pounds in process, May 31; materials 60% complete;
conversion 40% complete
24,000
Cost data:...
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