Business, 21.05.2021 17:10 darkdestroyer0888

You will need to estimate future cash flows for a firm and then apply discounted cash flow analysis to estimate the value of a firm. You will then need to decide if you would sell the firm at a specific price. 1. Organic Micros was established 8 years ago by Mary Mendoza. The firm reported EBIT this year of $80,000. Mary typically reports about $2,000 in personal expenses through the firm each year. She also pays herself a salary of $60,000 despite the market rate for such a position being closer to $30,000.
2. The firm currently reports $10,000 in depreciation expenses every year.
3. The firm will need $25,000 of inventory replaced in year 1 and will also require the replacement of equipment during year 4 in an amount totaling $50,000.
4. The firm currently has outstanding debt of $400,000. The firm has been historically financed in a way that 30% of funds are a result of debt financing. The cost of this debt financing is estimated to be 12% while the cost of equity financing is estimated at 22%.
5. Mary originally invested $120,000 of her own funds in the firm which establishes a cost basis for the firm of $120,000. Mary typically falls in a tax bracket that results in a total tax rate of 40%.
6. Based on the firm’s maturity and the state of the industry, it is estimated the EBIT will increase by 9% each year for the next 5 years. Beyond this time frame, a reasonable estimate of growth is neither possible nor relevant.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 NAME Official EBIT Owner's Salary Reasonable Salary Depreciation Personal Expenses Estimated EBITDA New Equipment Inventory Investment Free Cash Flow Current EBIT Owner's Salary Reasonable Salary Depreciation Personal Expenses New Equipment Inventory Investmer Estimated Growth R Tax Rate Weight Of Debt Weight Of Equity Cost Of Debt Cost Of Equity WACC Terminal Value CF1 CF2 CF3 CF4 CF5 NPV Value Of Firm Basis Of Firm Gain Taxes Owed Value Of Debt Net Proceeds Sell For $900k? Sell For $700K?

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 12:10

The following transactions occur for badger biking company during the month of june: a. provide services to customers on account for $32,000. b. receive cash of $24,000 from customers in (a) above. c. purchase bike equipment by signing a note with the bank for $17,000. d. pay utilities of $3,200 for the current month. analyze each transaction and indicate the amount of increases and decreases in the accounting equation. (decreases to account classifications should be entered as a negative.)

Answers: 1

Answer

Business, 22.06.2019 14:10

When a shortage or a surplus arises in the loanable funds market a. the supply of loanable funds changes to return the economy to its original real interest rate b. the nominal interest rate is pulled to the new equilibrium level c. the demand for loanable funds changes to return the economy to its original real interest rate d. the real interest rate is pulled to the new equilibrium level

Answers: 3

Answer

Business, 22.06.2019 14:50

Pear co.’s income statement for the year ended december 31, as prepared by pear’s controller, reported income before taxes of $125,000. the auditor questioned the following amounts that had been included in income before taxes: equity in earnings of cinn co. $ 40,000 dividends received from cinn 8,000 adjustments to profits of prior years for arithmetical errors in depreciation (35,000) pear owns 40% of cinn’s common stock, and no acquisition differentials are relevant. pear’s december 31 income statement should report income before taxes of

Answers: 3

Answer

Business, 22.06.2019 15:30

University hero is considering expanding operations beyond its healthy sandwiches. jim axelrod, vice president of marketing, would like to add a line of smoothies with a similar health emphasis. each smoothie would include two free health supplements such as vitamins, antioxidants, and protein. jim believes smoothie sales should fill the slow mid-afternoon period. adding the line of smoothies would require purchasing additional freezer space, machinery, and equipment. jim provides the following projections of net sales, net income, and average total assets in support of his proposal. sandwichesonly sandwiches and smoothies net sales $ 750,000 $ 1,350,000 net income 120,000 210,000 average total assets 350,000 750,000 return on assetschoose numerator ÷ choose denominator = return on assets÷ = return on assets÷ = profit margin÷ = profit margin÷ = asset turnover÷ = asset turnover÷ = times

Answers: 2

Answer

You know the right answer?

You will need to estimate future cash flows for a firm and then apply discounted cash flow analysis...

Questions