Question
RT Auto, Inc. is an auto parts manufacturer. The companys depreciation and net income this year are provided below (in $ millions): ( Projected) Depreciation
RT Auto, Inc. is an auto parts manufacturer. The companys depreciation and net income this year are provided below (in $ millions):
| (Projected) |
Depreciation | 350 |
Net Income | 550 |
The company has two different business divisions, and each division is considering investing in a project:
Project |
Investment | Estimated Return on Equity |
Beta |
A | $490 mil | 15.0% | 0.9 |
B | $460 mil | 16.0% | 1.5 |
The treasury bond rate is 2.0%. The firm expects working capital to increase by $50 million. The firm is currently at its optimal debt ratio of 30%, and hence it plans to finance its net capital expenditures and working capital needs with 30% debt in order to remain at its optimal ratio.
The companys projected capital expenditure is . Assume an expected return on the market of 14%. Record your answer in millions of dollars, and omit the dollar symbol (e.g., record $100 million as 100).
The companys free cash flow to equity is . Record your answer in millions of dollars, and omit the dollar symbol (e.g., record $100 million as 100).
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