Ask Question, Ask an Expert


Ask Corporate Finance Expert

problem 1: The summary of the forecast of your company next year is as follow:

a) The firm expects to have earning per share (ESP) of $5.
b) The firm will retain all of its earnings for the next two years.
c) For the subsequent two years the firm will retain 50% of its earning.
d) The firm will retain 20% of its earnings from that point AFTERWARD.
e) Each year, retained earnings will be invested in new projects with an expected return of 25% per year.
f) Any earning that are not retained will be paid our as dividends.
g) The firms share count remains constant and all earning growth comes from the investment of retained earnings.
h) The firms equity cost of capital is 10%.

A) Draw the time time that can show the amount and timing of cash flow.
B) What price does the dividend discount model predict that your firm’s stock should sell?
C) what is the difference or strength of the free cash flow model over the dividend discount model?

problem 2: You are the CFO of your company, have an investment project. The project summarized below.

a) The project requires an initial investment in plant and equipment of $2 million.
b) The investment will be depreciated straight- line over 5 years to a salvage value of zero and the old machine is fully depreciated.
c) The firm belives that working capital must be maintained at 10% of next years forcasted revenues.
d) Revenues generated by this project are forecast as follows:

years               revenues
1                    $1000,000   
2                    $800,000   
3                    $800,000
4                    $600,000
5                    $500,000
thereafter        $ 0

e) Operating expenses are expected to be 30% of the current years revenues.
f) The firms tax rate is 40%.
g) The required return on the project is 10%.

A) What are project free cash flows in year 0 to 5 that should be used to evaluated the proposed project?
B) What is project NPV?
C) What would your investment decision-make be? And why?

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M97464

Have any Question? 

Related Questions in Corporate Finance

Select a subject and use a full-text database such as

Select a subject and use a full-text database such as PsycArticles to locate an empirical journal article that reports the results of a research study examining your subject. Specifically, find an article in which the re ...

The purpose of this exercise is to familiarize you with the

The purpose of this exercise is to familiarize you with the wide variety of personal finance resources on Yahoo!. Go to a. Determine how inflation and taxes will affect your investment ...

Finance essaythe essay should be 2 pagesyour assignment

Finance Essay The essay should be 2 pages. Your assignment will have these parts: 1. Discuss your stock performance for your portfolio and how you allocated your cash within each position within the constraints above. Di ...

1 how can smaller firms remain competitive in the exchange

1. How can smaller firms remain competitive in the exchange or logistics information? 2. Discuss and compare the role that ED1 and the Internet will play in facilitating communication between supply chain partners. 3. Co ...

Assignment using financial ratios to assess organizational

Assignment: Using Financial Ratios to Assess Organizational Performance Using the financial statements from your selected health care organization in Assignment, develop a financial plan for the next three years. Write a ...

The global financial crisis and multinational corporations

The Global Financial Crisis and Multinational Corporations - The global financial crisis from 2007-2011 produced adverse effects on multinational corporations (MNCs). Select a US based MNC and analyze its transaction, ec ...

1 describe the process by which hurricanes form2 what scale

1. Describe the process by which hurricanes form. 2. What scale is used to describe the intensity of hurricanes? 3. What are the various ways that hurricanes cause damages to a community? 4. What is a SLOSH model used to ...

Assignmenti have an assignment that is need in apa format

Assignment I have an assignment that is need in APA format. There is no word count it just have to be completely informative. The paper must be Plagiarish free. The proposal has to be submite to the instructor that detai ...

1 your financial position name some factors that might

1. Your Financial Position. Name some factors that might affect your current financial position. 2. Financial Goals and Planning. How do your current financial position and goals relate to your creation of alternative fi ...

Adapt to cultural differences in email responsesafter you

Adapt to cultural differences in email responses. After you discuss your interpretation of the emails in the previous exercise, individually write separate email responses to Ms. Zimmermann and Mr. Yamashita. How can you ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro