Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

BMA is manufacturer of wholesale food products. Their sales fluctuate with consumer tastes. Revenue was greater in 2020 as people stayed home during COVID buying

BMA is manufacturer of wholesale food products. Their sales fluctuate with consumer tastes. Revenue was greater in 2020 as people stayed home during COVID buying more food for their household. Expected Revenue for the next three years are forecast to be $33M, $34M and $35.5M. 1. Calculate the components of FCF, making any necessary adjustments, using the long-form method and forecast their FCF for 2021, 2022 and 2023. Make sure your forecast assumptions are clearly shown. (70 points) 2. Recalculate your free cash flow forecast for 2021, 2022 and 2023 lowering working capital needs by 15%. For example, if your FCF forecast is based upon WC/Revenue of 20% then you would lower WC/Rev to 17%. (5 points) 3. Will your revised forecast result in a change in the firm's ROIC? No calculations are necessary. Explain? (5 points) -------- 4. Independent of ques. 1-3, does a low Free Cash Flow/Invested Capital ratio indicate poor financial performance. Explain. (10 points) 5. How can one use a firm's free cash flow to assess the "quality of earnings"? (10 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Marketing And Export Management

Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr

8th Edition

1292016922, 978-1292016924

More Books

Students also viewed these Finance questions

Question

18. How does prolonged stress damage the hippocampus?

Answered: 1 week ago

Question

15. What kind of cell releases cytokines?

Answered: 1 week ago