Find the company free cash flow

Assignment Help Finance Basics
Reference no: EM132731648

The company's sales revenue last year was 16 million euros. The operating profitability of the company's turnover is 25%. Depreciation was 750,000 euros last year and the volume of investments has been stable at 20% of operating profit. The company's investment in net working capital was 800,000 euros last year and it changes in proportion to sales revenue. Find the company's free cash flow for the previous year (FCFF) based on the above data.

We now assume that the free cash flow will increase by 10% per year over the next four years, but from the fifth year onwards, the growth rate will decrease to only 2%. When finding the price of a company's capital, it can be assumed that the risk-free interest rate is 3%, the company's beta is 1.25 and the market rate of return is 12%. The weighted average effective interest rate on corporate loans is 6%. The share of the company's debt capital in the total value of the company is planned to be stable at 30%. The company has several non-core financial investments with a current market value of 5 million euros. The company has issued a total of 250,000 shares

a) Find the company's free cash flow (FCFF) for the previous year and free cash flow projections according to the forecasts.

b) Find the price of the company's capital

c) Find the value of the company

d) Calculate the equity value and the share price.

Reference no: EM132731648

Questions Cloud

Explain the five-step capital budgeting process : List and briefly explain the five-step capital budgeting process.
Compare speculative risk and pure risk : Compare speculative risk and pure risk. Provide an example of each.
How would you confront the differences : A discussion of the challenges that you would face in confronting your own biases, assumptions, values if this character were a client assigned to you.
Establishing an individual retirement plan : What are the basic factors that should be considered when establishing an individual retirement plan?
Find the company free cash flow : Find the company's free cash flow (FCFF) for the previous year and free cash flow projections according to the forecasts.
Send an email to your human resources team : Inform them of the new employee's starting date and when their induction can begin - Send an email to the pay department
Terminate the deposit agreement : Terminate the deposit agreement and convert dollars into euros and deposit euros in a Latvian bank
Should bellingham packaging purchase the machine : Should Bellingham Packaging purchase the machine? Be quantitatively specific with your answer
Which security should the treasurer select : Suppose the federal tax rate is 25% and the state tax rate is 5%. Which security should the treasurer select, assuming the securities have equal default risks?

Reviews

Write a Review

Finance Basics Questions & Answers

  Monitoring an operating budget

Discuss which financial management practices are least effective in creating and monitoring an operating budget.

  Advantage and disadvantage of using short-dated

What is the advantage and disadvantage of using short-dated (1 month) options versus longer-dated (3 month) options to hedge your position?

  Construct the binomial tree for the stock

Let S=$300, K=$300, r=10% risk-free interest rate, (continuously compounding), T=3 years, n=3, three-period binomial tree, delta=6.5%, continuous dividend

  What is the preferred market segment for the investor

A forecast shows improving to declining economic conditions with the following probabilities: improving (0.2), stable (0.5), and declining (0.3).

  What is knights stock price

Knight Inc. is expected to pay a $1.80 dividend next year. The dividend in year 2 is expected to be $2.10. The dividend in year 3 is expected to be $2.50. After that, the dividend is expected to grow at a constant rate of 2%. The cost of capital i..

  Prepare the company statement of cash flows

Preparing a statement of cash flows using the direct method Green Bean, Inc. began 2016 with cash of $57,000. During the year, Green Bean earned revenue.

  Commercial banks and other financial institutions

Medium term & long term loans are obtained from commercial banks and other financial institutions. This funds are mainly used to finance major expansions or profit financing.

  Which investment will you choose

Considering the attached table, whichever project you choose, if any, you require a 15% return on your investment.

  Calculate the periodic and cumulative net cash flows

Analyze Genesis Energy's project options. Then, calculate the periodic and cumulative net cash flows for each potential project

  Use the geometric average

What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is NOT valid? Include the cross-product term, i.e., if averaging is required, use the geometric average.

  What is difference between coupon rate and the ytm of bonds

What is the difference between the coupon rate and the YTM of bonds? What factors will contribute to the riskiness of these bonds? Explain in detail your rationale.

  What is the present value of a payment made every year

What's the present value, when interest rates are 7.5 percent, of a $170 payment made every year forever? (Round your answer to 2 decimal places.)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd