Homework Answers
1]
FCF = EBIT after tax - capital expenditure + depreciation and amortization - change in net working capital.
1.1]
FCF = 1275
1.2]
FCF = 2041
2]
WACC = (weight of debt * after-tax cost of debt) + (weight of equity * cost of equity)
after-tax cost of debt = interest rate * (1 - tax rate) = 5% * (1 - 35%) = 3.25%.
weight of debt = bank loan / total capital = 1200 / (1200 + 800) = 0.60.
weight of equity = equity investment / total capital = 800 / (1200 + 800) = 0.40.
WACC = (0.60 * 3.25%) + (0.40 * 10%) = 5.95%.
3]
NPV = present value of FCF - initial investment
Present value of each FCF = FCF * discount factor.
Discount factor each year = 1 / (1 + WACC)year
NPV is 8451.
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free cash flow
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Please calculate the present value of Starbucks Corp. using it's
free cash flow (FCF = cash flow from operating activities - cash
flow from investment activities).
Use it's cash flow statements from 2005 to 2019; Necessary
Economic conditions are as follows: Discount rate 5%, Growth Rate
2%, Inflation Rate 2%.
Provide 3 limitations of this method you found while applying it
to Starbucks (e.g. limited application, assumptions on future,
regression analysis, etc.)
Be sure to provide rationales for why you...
Value of Operations: Constant FCF Growth EMC Corporation's current free cash flow of $400,000 and is expected to grow at a constant rate of 4.5%. The weighted average cost of capital is WACC = 12%. Calculate EMC's estimated value of operations. Do not round intermediate calculations. Round your answer to the nearest dollar. Horizon Value of Free Cash Flows Current and projected free cash flows for Radell Global Operations are shown below. Actual Projected 2019 2020 2021 2022 $618.520 $679.200...
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