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You are an analyst that has been requested to assess FCFF and FCFE in the recently...

You are an analyst that has been requested to assess FCFF and FCFE in the recently completed financial year ended 30 June 2016 in a company under review. You have been provided with the information below:

$ thousands

EBITDA

64,208

Depreciation

15,144

Net Interest Expense

5,550

Capital Expenditure net of proceeds on disposal

16,240

Increase in Net Operating Working Capital

1,190

New issues of unsecured notes (bonds)

10,440

Unsecured notes redeemed

7,642

Issues of new Ordinary Shares

13,910

Ordinary Share Buy-backs

8,012

Stock dividends (bonus shares)

2,686

Ordinary Share Cash dividends

6,876

New issues of Preference Shares

1,504

Preference Share redemptions

1,370

Preference Share Cash dividends

92

Other Information:

Company Tax Rate is a flat 30%. You are to ignore the possible existence of imputation (franking) credits. All preference shares are classed as equity by this firm. Depreciation is the only Non-Cash Charge. The only debt in this firm comes from unsecured notes.

Tasks:

(a) Calculate FCFF (Free Cash Flow to the Firm)

(b) Calculate FCFE (Free Cash Flow to Equity)

(c) Calculate the dividend payout ratio and the retention ratio.

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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