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ABC's EBIT is $12 million. The depreciation expense is $0.5 million and interest expense is $0.5 million. The corporate tax rate is 30%. The company has 10 million in operating current assets and $3 million operating current liabilities. It has $12 million in net plant and equipment. The after-tax cost of capital (WACC) is 8%. Assume that the only non-cash item is depreciation. The total net operating capital last year was $15 million. What was the company

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Collen Von
Collen VonLv2
28 Sep 2019

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Please help with question D

Last year Rattner Robotics had $5 million of operating income. Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 40%. At year-end, it had $14 million in current asset, $3 million in accounts payable, $1 million in (expense) accrual’s, $2 million in notes payable, and $15 million in net plant and equipment. Rattner had no other current liabilities. Assume that Rattner's only noncash item was depreciation.

a. What was the company's net income?

b. What was its net operating working capitals (NOWC)?

c. What was its net working capital (NWC)?

d. Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

e. Rattner had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during last years. Last year's balance in retained earnings was $12 million and the firm paid out dividends of $1.2 million during the year. Develop Rattner's end-of-year Statement of StockHolders Equity.

What was the company's net income?

Company's net income = (operating income - interest expense)*(1-tax rate)

(5 -1)*(1-40%)

Company's net income = $ 2.40 Milliion

What was its net operating working capitals (NOWC)?

Net operating working capitals = current asset - accounts payable - accruals

14 - 3 - 1

Net operating working capitals = $ 10 Million

What was its net working capital (NWC)?

Net working capital = current asset - Current liabilty

14 - (3 + 1 + 2)

Net working capital = $ 8 Million

Rattner had $12 million in net plant and equipment the prior year. Its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

e. Rattner had 500,000 common shares outstanding and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during last years. Last year's balance in retained earnings was $12 million and the firm paid out dividends of $1.2 million during the year. Develop Rattner's end-of-year Statement of StockHolders Equity.

End of Year Statement of Stockholders Equity

Particulars

Common Stock

5,000,000.00

Retained earnings

10,800,000.00

Total Stockholders Equity

15,800,000.00

Retained earnings =last years earnings-dividend paid

12,000,000.00-1,200,000.00=10,800,000.00

Corporate value model

Assume that today is December 31, 2016, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2017 is expected to be $550 million.
The depreciation expense for 2017 is expected to be $140 million.
The capital expenditures for 2017 are expected to be $200 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 5% per year.
The required return on equity is 16%.
The WACC is 10%.
The market value of the company's debt is $5 billion.
130 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today?

SHOW ALL WORK PLEASEE!


You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm’s free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $92 million, had a tax rate of 30 percent, and its depreciation expense was $6 million. Fields and Struthers’ gross fixed assets increased by $58 million from 2014 and 2015. The firm’s current assets increased by $46 million and spontaneous current liabilities increased by $38 million.

Calculate Fields and Struthers’ operating cash flow for 2015. (Enter your answer in millions of dollars rounded to 1 decimal place.)

Operating cash flow $
m

Calculate Fields and Struthers’ investment in operating capital for 2015. (Enter your answer in millions of dollars.)

Investment in operating capital $
m

Calculate Fields and Struthers’ free cash flow for 2015. (Enter your answer in millions of dollars rounded to 1 decimal place.)

Free cash flow $
m

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