Question
Positive free cash flows for three consecutive years from 2015 to 2017 is a highly desirable state in terms of long term projections. True or
Positive free cash flows for three consecutive years from 2015 to 2017 is a highly desirable state in terms of long term projections.
True or False
2. We assigned a constant growth rate of 6%. Gordon Growth Model using FCF or Constant Growth Model with dividends, but in this case we are using the Free Cash Flows instead of dividends. How is NOPAT related to a firms true value?
3. Define NOPAT and explain why free cash flows are paramonut to investors? Explain the trends in NOPAT from the year 2019 - 2022?
4. We used the Weighted Average Cost of Capital (WACC) in stead of Cost of Equity as it relates to investments. Which of the aforementioned may be more essential to an investor? What percentage is the WACC? Is this a good or ideal percentage?
5. The growth rate within each line of the FCF analysis remains consistent with the firms ability to generate cash, pay tax obligations, and continue operations.
6. Examine the forecasted years of 2020 - 2022. What correlation can be garnered from the firms NOPAT, Net Operating Working Capital, and Net Fixed Assets?
7. Explain the difference and importance of the firms Intrinsic Value per Share vs. the Intrinsic Value of Firm's Equity.
7a. From the firm's financial statements, can you detect if the firm is performing at a desireable rate? If so, is the firm projected to be profitable in 5 - 10 years?
7b. How is the intrnsic value of the firm's equity related to the number of shares outstanding?
7c. What is the Intrinsic Value per Share?
a. 133.59
b. 185.12
c. 193.67
d. 192.34
8. The amount of long-term borrowing is something set by management and does not necessarily relate directly to the level of sales. The idea behind this approach is to separate the income statement and balance sheet in to two groups; those that vary directly with sales and those that do not.
True or False
9. For the percentage of sales forecast we will be able to calculate how much financing the firm will need to support the predicted sales level. What is an applicable estimate or forecasted dollar amount that the firm may need to consider in terms of sales expense from 2019 - 2022.
10. For some accounts, the sales go up or down and there will be no change. This approach uses sales as the driving force. We project that there will be a 31 percent increase in sales for the coming year, since we are anticipating sales of 1,000 x 1.31= 1,250. What is the cost of sales?
a. The cost of sales is 32% percent
b. The cost of sales is 38% percent
c. The cost of sales is 31% percent
b. The cost of sales is 36.1% percent
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