Question
Consider the following information regarding the financial forecast for a new business: Industry Sales Forecast YEAR 2021 2022 2023 2024 2025 Total Market (in $
Consider the following information regarding the financial forecast for a new business:
Industry Sales Forecast
YEAR | 2021 | 2022 | 2023 | 2024 | 2025 |
Total Market (in $ thousands) | 8,956,000 | 9,403,800 | 9,873,990 | 10,367,690 | 10,886,075 |
Your business market share | 1.20% | 1.30% | 1.40% | 1.50% | 3.00% |
Industry Cost Structure
% of sales | |
COGS | 36% |
Depreciation | 3% |
Sales & Marketing Exp. | 10% |
Administrative Exp. | 10% |
YEAR | 2021 | 2022 | 2023 | 2024 | 2025 |
CAPEX (in $ thousands) | $2,000 | 2,000 | 2,000 | 2,000 | 2,000 |
Investment in NWC is 10% of the change in sales | $1,478 | ? | ? | ? | ? |
Assume the business will be able to have the same cost structure as the industry since its first year of operations. The business is 100% equity financed (so there is no interest expense).
What is your forecast of the Free Cash Flow (FCF) for the business in 2023 (assume tax rate is 28%)?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the Free Cash Flow FCF for the business in 2023 we need to consider the following steps ...
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Step: 2
Step: 3
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
