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Q6) The following table shows expected cash flows of fim XYZ. Calculate the cash flows of 2021 and 2022 with the assumption that net sales
Q6) The following table shows expected cash flows of fim XYZ. Calculate the cash flows of 2021 and 2022 with the assumption that net sales will grow at 5% and consequently all other things too. After 2022, cash flows will grow at a constant rate of 6% and discount rate is 10%. Calculate the estimated firm's value. Suppose 1-E/A = 40%. The firm can issue debt at 11%. Rf is 5%, market return is 8%, tax rate is 10%, and firm's beta is 3 times higher than the market. (10) 2021 2022 Net sales - Cost of goods sold - Selling/admin. exp. - Interest expense EBT - Taxes Net Income Retentions Cash flow 2017 $60.0 36.0 4.5 3.0 16.5 6.6 9.9 0.0 9.9 2018 $90.0 54.0 6.0 4.5 25.5 10.2 15.3 7.5 7.8 2019 $112.5 67.5 7.5 4.5 33.0 13.2 19.8 6.0 13.8 2020 $127.5 76.5 9.0 6.0 36.0 14.4 21.6 4.5 17.1
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