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Ouestion 9. (10 marks) You are asked to project Value Co (Value)'s free cash flows (to the firm) over the next 10 years. Value's sales this year (year 0) was $240 and its cost of goods sold was $120. Value's sales are expected to be $250 next year which will increase by 10% each year thereafter. Value's cost of goods sold is expected to stay constant at 50% of sales. Value's EBIT margin is expected to stay constant at 40%. Value's existing net plant, property, and equipment is $100 and will be depreciated to zero in 8 years, using the straightline method. Value will spend 20% of its revenues for each year as capital expenditures. The capital expenditures will be depreciated to zero in 8 years, using the straight-line method. Value's capital expenditures for any particular year are made at the start of that year. Value's working capital consists of accounts receivables, inventories, and accounts payables. Value's current (year 0) accounts receivables is $30, inventory is $10, and accounts payable is $25. Value's days sales outstanding, days inventory held, and days payable outstanding is expected to remain constant in the future. The days sales outstanding, days inventory held, and days payable outstanding of a particular year are calculated based only on that year's account receivables, inventories, account payables, sales and cost of goods sold. Value's company tax rate is 30%. (a) What is Value's expected after-tax EBIT for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (1 mark) (b) What is Value's expected capital expenditures and depreciation for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (4 marks) (c) What is Value's expected increase in net working capital for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (4 marks) (d) What is Value's expected free cash flow (to the firm) for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (1 mark) Ouestion 9. (10 marks) You are asked to project Value Co (Value)'s free cash flows (to the firm) over the next 10 years. Value's sales this year (year 0) was $240 and its cost of goods sold was $120. Value's sales are expected to be $250 next year which will increase by 10% each year thereafter. Value's cost of goods sold is expected to stay constant at 50% of sales. Value's EBIT margin is expected to stay constant at 40%. Value's existing net plant, property, and equipment is $100 and will be depreciated to zero in 8 years, using the straightline method. Value will spend 20% of its revenues for each year as capital expenditures. The capital expenditures will be depreciated to zero in 8 years, using the straight-line method. Value's capital expenditures for any particular year are made at the start of that year. Value's working capital consists of accounts receivables, inventories, and accounts payables. Value's current (year 0) accounts receivables is $30, inventory is $10, and accounts payable is $25. Value's days sales outstanding, days inventory held, and days payable outstanding is expected to remain constant in the future. The days sales outstanding, days inventory held, and days payable outstanding of a particular year are calculated based only on that year's account receivables, inventories, account payables, sales and cost of goods sold. Value's company tax rate is 30%. (a) What is Value's expected after-tax EBIT for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (1 mark) (b) What is Value's expected capital expenditures and depreciation for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (4 marks) (c) What is Value's expected increase in net working capital for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (4 marks) (d) What is Value's expected free cash flow (to the firm) for the next 10 years? Answer based only on the information provided. (Show your work in Excel. In Excel, show numbers at the two decimal places. Copy-paste your Excel work to your answer document as an image.) (1 mark)
