Question 1 5 points Save Answer You are trying to value the following project for your company. You know that the project will generate free cash flows in perpetuity that will grow at a constant annual rate of 1.5% after year 3. The applicable interest rate for this project is 7.5%. What is the NPV of this project? Express your result in S-millions do not include the S-symbol in your answer). If you calculate a negative NPV enter a negative number. Free Cash Flow Forecasts (in S-millions) Year 0 1 2 3 Free Cash Flows -154 -6 28 49 Question 2 5 points Save Answer Below are selected financial data on ABC Industries Inc. ABC has 3.32 billion shares outstanding and the current share price is $9.36. Assume that all cash and short-term investments are considered excess cash. In addition, assume that the market value of debt is equal to the book value of debt. Calculate the enterprise value of ABC. Express the enterprise value in S-billions and round to two decimals (do not include the S-sign in your answer). Assets Cash & Short-Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Balance Sheet (in $-billions) Liabilities $5.00 Accounts Payable $15.00 Short-Term Debt $20.00 Current Maturities of Long-Term Debt $4.00 Other Current Liabilities $44.00 Total Current Liabilities $25.00 $20.00 $30.00 $18.00 $93.00 Property, Plant & Equipment $410.00 Long-Term Debt $100.00 Less Accumulated Depreciation ($110.00) Capital Lease Obligations $0.00 Net Property, Plant & Equipment $300.00 Total Debt $100.00 Goodwill & Intangible Assets $10.00 Deferred Taxes ($10.00) Other Long-Term Assets $15.00 Other Long-Term Liabilities $17.00 Total Liabilities $200.00 Shareholders' Equity $169.00 Total Assets $369.00 Total Liabilities and Shareholders' Equity $369.00 Question 3 5 points Save Answer The table below shows free cash flow projections for four different projects. In addition, the table also shows the NPV, IRR, and Payback period for each project. If you can only invest in one project, which one should you pick? Year 0 1 Project 111 (20,000) 5,000 10,000 15,000 5,000 2 Project Free Cash Flows Project 1 Project 11 (20,000) (10,000) 5,500 5,500 5,500 5,500 5,500 5,500 5,500 40,000 9.0096 13.0096 7,681.24 7,002.43 19.6890 21.9090 4 7 Project IV (10,000) 1,000 2,000 3,000 4,000 5,000 14,000 3 4 5 6 12.0096 7,094,63 7 Interest Rate NPV IRR Payback Period (in Years) 1. Project 11.0096 6,882.25 25.3396 3 26.6390 4. II. Project 1 III Project III IV. Project IV OV. None Question 4 5 points Save Answer You are trying to assess a new project for you company. To that end you have put together some forecast for year 1 of the project in the table below. Using this information, calculate the free cash flow for year 1 of this project. Express the free cash flow in S-millions and round to two decimals (do not include the S-sign in your answer). 5 Project Forecasts for Year 1 (in 5 millions) Sales 154 Cost of sales 55 Selling, general and administrative expenses Depreciation 31 Increase in Net Working Capital Capital expenditures 38 Marginal corporate tax rate 239 6
