Expected net operating profit after taxes

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Reference no: EM131063562

1. Randall and Arts Inc. has an expected net operating profit after taxes, EBIT(1-T), of $3,200 million in the coming year. In addition, the firm is expected to have net capital expenditures of $480 million, and net operating working capital (NOWC) is expected to increase by $35 million.

How much free cash flow (FCF) is Randall and Arts Inc. expected to generate over the next year?

a) $2,755 million

b) $3,645 million

c) $45,828 million

d) $2,685 million

2. Randall and Arts Inc.’s FCFs are expected to grow at a constant rate of 4.98% per year in the future. The market value of Randall and Art’s Inc.’s outstanding debt is $12,131 million, and preferred stocks’ value is $6,739 million. Randall and Arts Inc. has 525 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 14.94%.

What is the:

Total firm value

a) $17,971.89

b) $26,957.83

c) $81,203.11

d) $53,915.66

Value of common equity

a) $14,826.83

b) $8,087.83

c) $14,301.83

d) $20,218.83

Intrinsic value per share a) $38.51

b) $27.24

c) $15.41

d) $28.24

Reference no: EM131063562

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