ZuoTi.Pro
Question

MazeRunner’s net income is reported as $1,300,000. The firm’s depreciation is $130,000. Assume the capital spending...

MazeRunner’s net income is reported as $1,300,000. The firm’s depreciation is $130,000. Assume the capital spending is $286,000 and the working capital of the firm increases by $91,000. What is the market value of equity if the FCFE is projected to grow at 5.7% indefinitely and the cost of equity is 17%? (Do not round intermediate calculations.)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

FCFE = Net Income + Depreciation - Capex - Change in Net working Capital + New debt - Debt Repayment

= 1300000 + 130000 - 286000 - 91000 = $1,053,000

Market Value of equity = FCFE1/(k-g) = $1,053,000*1.057/(0.17-0.057) = $9.85 million

0 0
Add a comment
Know the answer?
Add Answer to:
MazeRunner’s net income is reported as $1,300,000. The firm’s depreciation is $130,000. Assume the capital spending...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • St. Blues Technologies' expected (next year) EBIT is $292.00, its tax rate is 40%, depreciation is...

    St. Blues Technologies' expected (next year) EBIT is $292.00, its tax rate is 40%, depreciation is $18.00, planned capital expenditures are $80.00, and planned INCREASES in net working capital is $24.00. What is the free cash flow to the firm (FCFF)? $ The firm's interest expense is $24.00. Assume the tax rate is 40% and the net debt of the firm DECREASES by $5.00. What is the free cash flow to equity (FCFE)? $ What is the market value of...

  • Dewey Corp. is expected to have an EBIT of $2,900,000 next year. Depreciation, the increase in...

    Dewey Corp. is expected to have an EBIT of $2,900,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $225,000, $130,000, and $230,000, respectively. All are expected to grow at 17 percent per year for four years. The company currently has $17,500,000 in debt and 840,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.9 percent indefinitely. The company’s WACC is 9.3 percent and the...

  • You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources,...

    You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 17, a debt-to-equity ratio of 0.5, and a tax rate of 40 percent. Assume a risk-free rate of 6 percent and a market risk premium of 12 percent. Lauryn's Doll Co. had EBIT last year of $57 million, which is net of a depreciation expense of $5.7 million. In addition, Lauryn's made $4.3 million...

  • thumbs up if correct thanks! FinCorp reports $205 million in free cash flow to the firm...

    thumbs up if correct thanks! FinCorp reports $205 million in free cash flow to the firm (FCFF). The firm's interest expense is $22 million. Assume the tax rate is 35% and the net debt of the firm increases by $3 million. What is the market value of equity if FCFE is projected to grow at 3% indefinitely and the cost of equity is 12%? O $0 < equity values $500 mil $500 mil< equity value $1 bil $1 bil< equity...

  • 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 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...

  • You have looked at the current financial statements for Reigle Homes, Co. The company has an...

    You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $2,870,000 this year. Depreciation, the increase in net working capital, and capital spending are expected to be $226,000, $91,000, and $420,000, respectively. You expect that over the next five years, EBIT will grow at 17 percent per year, depreciation and capital spending will grow at 22 percent per year, and NWC will grow at 12 percent per year. The company currently has...

  • Dewey Corp. is expected to have an EBIT of $2,600,000 next year. Depreciation, the increase in...

    Dewey Corp. is expected to have an EBIT of $2,600,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $195,000, $100,000, and $200,000, respectively. All are expected to grow at 17 percent per year for four years. The company currently has $14,500,000 in debt and 810,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.3 percent indefinitely. The company’s WACC is 8.6 percent and the...

  • Dewey Corp. is expected to have an EBIT of $3,450,000 next year. Depreciation, the increase in...

    Dewey Corp. is expected to have an EBIT of $3,450,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $280,000, $185,000, and $285,000, respectively. All are expected to grow at 17 percent per year for four years. The company currently has $23,000,000 in debt and 895,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.9 percent indefinitely. The company’s WACC is 9.3 percent and the...

  • Pearl Corp. is expected to have an EBIT of $2,700,000 next year. Depreciation, the increase in...

    Pearl Corp. is expected to have an EBIT of $2,700,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $120,000, and $160,000, respectively. All are expected to grow at 17 percent per year for four years. The company currently has $14,000,000 in debt and 1,200,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 9.3 percent and the...

  • 20 Lansing Corporation reported net income of $67 million for last year. Depreciation expense totaled $15...

    20 Lansing Corporation reported net income of $67 million for last year. Depreciation expense totaled $15 million and capital expenditures came to $6 million. Free cash flow is expected to grow at a rate of 4.2% for the foreseeable future. Lansing faces a 40% tax rate and has a 0.36 debt to equity ratio with $250 million (market value) in debt outstanding. Lansing's equity beta is 1.92, the risk-free rate is currently 5% and the market risk premium is estimated...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT