Financial Statements Assignment | Homework For You
Refer to the information in the financial statements provided below to answer the following question on the exam. The firms average tax rate is 30% and its plowback ratio is 60%. All figures in the financial statements are in thousands of dollars (e.g. $15,000 equates to $15 million)
a. Find the firm’s cash flows
i. Operating cash flow (OCF)
ii. Net capital spending (NCS)
iii. Change in net working capital (ANWC)
iv. Cash flow to creditors (CFC)
v. Cash flow to shareholders (CFS)
vi. Free cash flow (FCF)
b. The firm has no preferred stock. Its common stock has a beta of 1.6. The expected return on the market portfolio is 12% and the risk-free rate is 5%. The firm has one issue of bonds outstanding with a YTM of 7% and a coupon rate of 5%. There are 90,000 of these bonds, they have face value of $1000, and they mature in 8 years. There are 6 million stocks outstanding. The most recent dividend paid was $2.50 and dividends are expected to grow 2% per year indefinitely.
i. What is the firms cost of equity using CAPM?
ii. If the firms cost of equity is the same as the required return on the stock, what is the stock price?
iii. What is the total market value of the firms stock?
iv. What is bond value for the outstanding bonds?
v. What is the total market value of the firms bonds?
vi. What is this firms WACC using market values to find the weights?
Income Statement Revenues Cost of Goods Sold Other operating expenses Depreciation expense EBIT Interest Expense Taxable income Taxes Net income 2019 $15.000 $7.000 $1,000 $2.000 $5.000 $3.200 S1,800 $1,260 Balance Sheet 2019 2020 2019 2020 Current Assets $10,000 $11,000 Current Liabilities $8,000 $8,700 Long-term debt 580,000 $81.000 Fixed Assets S170,000 S180,000 Total Debt $88,000 $89,700 Accumulated Depreciation $15,000 $17,00 Common Sock $17,000 Common Stock s $5,000 .com $11,544 Net fixed assets S155,000 S163,000 Accumulated Retained Earnings $72,000 $72.756 Total Equity $77,000 $54,300 Total Assets 5165,000 $174,000 Total Debt and Equity 5165,000 $174,000 . Get Finance homework help today