Question
You reviewed the books your parents gave you as you have considered assuming the family business?You?ve accepted the offer.Congratulations.You are now an entrepreneur. You?ve decided
You reviewed the books your parents gave you as you have considered assuming the family business?You?ve accepted the offer.Congratulations.You are now an entrepreneur.
You?ve decided that the business can grow in 2017 based upon some key markets that you can penetrate immediately, due to your networking and marketing skills learned while in the IU Division of Business at IUPUC.Based on your analysis, you create a pro forma financial summary:
Financial Pro Forma Forecast Summary for 2017 (all numbers in thousands of USD)
Net Sales1,200
COGS 500
Depreciation 260
Interest expense 110
Taxes paid60
Dividends20
Total Assets2,000
Net capital spending200
Net increase in
Working capital30
Net new borrowing100
Total interest-bearing
Debt as of 12/311,900
Based upon the Financial Pro Forma for 2017 provided above, compute the following numbers for 1-6
(5 points each):
1.EBIT
2.Net income
3.Addition to retained earnings
4.Operating cash flow
5.Cash flow from assets
6.How much net new equity was raised (or retired)?
7.GIVEN:Risk free rate (RFR) = 4%Beta = 2.5ERP = 7.5%D/E = 4.0
cost of debt (prior to tax adjustment) = 6.5%tax rate = 33%
FIND:WACC
8.GIVEN:EBIT = 6,000Depreciation = 250Taxes = 100
Net Cap Ex = 250Net Increase in Working Capital = 100
FIND:CFFA
9.GIVEN:Net Income = 5,000Depreciation = 250Interest Expense = 750
Net Cap Ex = 275Net increase in Working Capital = 10
FIND:CFFA
10.GIVEN:RFR = 1.75%Beta = 2.0ERP = 8.0%D/E = 0.5
Cost of debt (prior to tax adjustment) = 5.0%tax rate = 40%
FIND:WACC
F 301 DUE: June 15th Assignment 4 You reviewed the books your parents gave you as you have considered assuming the family business... You've accepted the offer. Congratulations. You are now an entrepreneur. You've decided that the business can grow in 2017 based upon some key markets that you can penetrate immediately, due to your networking and marketing skills learned while in the IU Division of Business at IUPUC. Based on your analysis, you create a pro forma financial summary: Financial Pro Forma Forecast Summary for 2017 (all numbers in thousands of USD) Net Sales COGS Depreciation Interest expense Taxes paid Dividends 1,200 500 260 110 60 20 Total Assets 2,000 Net capital spending Net increase in Working capital 200 30 Net new borrowing 100 Total interest-bearing Debt as of 12/31 1,900 Based upon the Financial Pro Forma for 2017 provided above, compute the following numbers for 1-6 (5 points each): 1. EBIT 2. Net income 3. Addition to retained earnings 4. Operating cash flow 5. Cash flow from assets 6. How much net new equity was raised (or retired)? 7. GIVEN: Risk free rate (RFR) = 4% cost of debt (prior to tax adjustment) = 6.5% FIND: WACC Beta = 2.5 ERP = 7.5% tax rate = 33% 8. GIVEN: EBIT = 6,000 Depreciation = 250 Taxes = 100 Net Cap Ex = 250 Net Increase in Working Capital = 100 FIND: CFFA 9. GIVEN: Net Income = 5,000 Depreciation = 250 Interest Expense = 750 Net Cap Ex = 275 Net increase in Working Capital = 10 FIND: CFFA 10. GIVEN: RFR = 1.75% Beta = 2.0 Cost of debt (prior to tax adjustment) = 5.0% FIND: WACC ERP = 8.0% tax rate = 40% D/E = 0.5 D/E = 4.0Step by Step Solution
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