SHOW WORK

1. WACC of the firm is 15% and the ROIC (return on invested capital) for the current year is 12%. The company grows at 30% this year. Does the high growth rate contribute the value of the firm? a. Yes b. No

2. Suppose Leonard, Nixon, & Shull Corporations projected free cash flow for next year is $100,000 (FCF1), and FCF is expected to grow at a constant rate of 6%. If the companys weighted average cost of capital is 11% and the value of non-operating asset is $200,000, what is total corporate value? a. $1,714,750 b. $1,805,000 c. $1,900,000 d. $2,000,000 e. $2,200,000

3. Last year South Bend Inc. had $500 million of sales, and the sales will be forecasted $600 million this year. Last years spontaneous assets were $200 million. What is the forecasted spontaneous assets this year. Assume that the firm is operated at full capacity and the firm is using percent of sales method for forecasting. a. $210 million b. $220 million c. $230 million d. $240 million e. $250 million