We find the following information on NPNG (No-Pain-No-Gain) Inc. EBIT = $2,000,000 Depreciation = $250,000 Change...
We find the following information on NPNG (No-Pain-No-Gain) Inc.
- EBIT = $2,000,000
- Depreciation = $250,000
- Change in net working capital = $100,000
- Net capital spending = $300,000
These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future:
- EBIT: 10%
- Depreciation: 15%
- Change in net working capital: 20%
- Net capital spending: 15%
The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $6,000,000 in debt. We have estimated the WACC to be 15%.
a. Calculate the EBIT, Depreciation, Changes in NWC, and Net Capital Spending for the next four years.
b. Calculate the CFA* for each of the next four years, using the following formula:
CFA* = EBIT(1 – T) + Depr – ΔNWC – NCS
d. Calculate the present value of growing perpetuity at Year 3.
Homework Answers
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We find the following information on
NPNG (No-Pain-No-Gain) Inc.
EBIT = $2,000,000
Depreciation = $250,000
Change...
We find the following information on NPNG (No-Pain-No-Gain) Inc. (18 marks total) EBIT = $2,000,000 Depreciation...
We find the following information on NPNG (No-Pain-No-Gain) Inc. (18 marks total) EBIT = $2,000,000 Depreciation = $250,000 Change in net working capital = $100,000 Net capital spending = $300,000 These numbers are projected to increase at the following super normal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 10% Depreciation: 15% Change in net working capital: 20% Net capital spending: 15% The firm’s tax rate is 35%, and it has...
We find the following information on NPNG (No-Pain-No-Gain) Inc. (18 marks total) EBIT = $2,000,000 Depreciation...
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