Question
Create a Free Cash Flow and Discounted Cash Flow Statement. The tax rate and discount rate are not given, so the percentage below is an
Create a Free Cash Flow and Discounted Cash Flow Statement. The tax rate and discount rate are not given, so the percentage below is an assumption. If there are better assumptions, then feel free to use that with a description as to why it is better. The EBIT is from the company that is trying to bought; their stand alone basis projected income statement and balance sheet. Show all calculations.
Would you say the merger is a good idea?
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| EBIT | $3,052 | $3,210 | $3,470 | $3,683 | $3,915 | $4,118 | $4,188 |
| Tax Rate | 36% | 36% | 36% | 36% | 36% | 36% | 36% |
| Discount Rate | 12% | 12% | 12% | 12% | 12% | 12% | 12% |
| Capital Expenditures | $2,365 | $2,070 | $1,910 | $1,930 | $1,930 | $1,949 | $1,969 |
| Increase in EBIT Pre-merger | $0 | $214 | $529 | $844 | $1,159 | $1,260 | $1,260 |
| Increase in EBIT Post Merger | $0 | $214 | $529 | $968 | $1,407 | $1,631 | $1,755 |
| NWC | -$192 | -$128 | -$134 | -$140 | -$146 | -$151 | -$154 |
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
9th Edition
978-0470317549, 9780470387085, 047031754X, 470387084, 978-0470533475
