Question
In the most recent year, WBA had a poor financial performance. The company made only $40 million in net income. It expects next year to
In the most recent year, WBA had a poor financial performance. The company made only $40 million in net income. It expects next year to be more normal. The book value of equity is $1 billion, and the average return on book equity over the previous 10 years (assumed to be a normal period) was 10%. The mangement of WBA plans to make $ 0 million in new capital expenditures next year. It expects depreciation, which was $60 million this year, to grow 10% next year. The company had revenues of $1.5 billion this year, and it maintained a non-cash working capital investment of 10% of revenues. It expects revenues to increase 20% next year and working capital to decline to 9.5% of revenues. The firm expects to maintain its existing debt policy (in market value terms). The market value of equity is $1.5 billion. The debt outstanding (in both book and market terms) is $500 million. Estimate next years Free Cash Flow to Equity?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started