man.2 Problem 18-12 APVLonghorn, Incorporated, has produced rodeo supplies for over 20 years. The companycurrently has a debt-equity ratio of 55 percent and the tax rate is 23 percent. Therequired return on the firm's levered equity is 14 percent. The company is planning toexpand its production capacity. The equipment to be purchased is expected to generatethe following unlevered cash flows:YearO123Cash Flow-$18,400,0005,740,0009,540,0008,840,000The company has arranged a debt issue of $9.42 million to partially finance theexpansion. Under the loan, the company would pay interest of 9 percent at the end ofeach year on the outstanding balance at the beginning of the year. The company alsowould make year-end principal payments of $3,140,000 per year, completely retiring theissue by the end of the third year. What is the APV of the project? (Do not roundintermediate calculations and enter your answer in dollars, not millions of dollars,rounded to 2 decimal places, e.g., 1,234,567.89)X Answer is complete but not entirely correct.APV$ -5,334,389.29 X

Variables in the question:Debt -equity ratio=55%=0.55Tax rate=23%=0.23Required return on firm's…

Answered: Longhorn, Incorporated, has produced…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

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Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 20PROB

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Problem 18-19 The MoMi Corporation's cash flow from operations before interest and taxes was $4.2 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pretax cash flow each year. The tax rate is 35%. Depreciation was $310,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 10% per year, and the firm currently has debt of $6.6 million outstanding. Use the free cash flow approach to value the firm's equity. (Round answer to nearest whole number. Enter your answer in dollars not in millions.) Value of the equity
TB MC Qu. 18-28 Joshua Industries is considering a new... Joshua Industries is considering a new project with revenue of $478,000 for the indefinite future. Cash costs are 68 percent of the revenue. The initial cost of the investment is $685,000. The tax rate is 21 percent and the unlevered cost of equity is 14.2 percent. The firm is financing $200,000 of the project cost with debt. What is the adjusted present value of the project? Multiple Choice O O O $207,975 $232,408 $202,429 $225,941 $198,311
Week 4 Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The company requires a 12% return. Required: Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?
Revenues generated by a new fad product are forecast as follows: Year 1 2 4 Revenues $33,981 40,000 20,000 10,000 Thereafter O Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $40,000 in plant and equipment that will be depreciated using the straight-line method over 5 years. The firm recently spent $2,000 on a study to estimate the revenues of the new product. The tax rate is 20%. What is the operating cash flow in year 1? Answer to nearest whole dollar amount. 15,192
15 the a Coastal Carolina Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar beating system. To meet this demand, management plans to expand production capacity by 25% with $ 15 million investment in plant and machinery The firm wants to maintain a 55% debt level in its capital structure. It also wants to maintain its past dividend policy of distributing 50% of last year's net income. Ia 2021, net income was $5 million. How much external St equity must Coastal Carolina seek at the beginning of 2072 to expand "Heas desired? Assume that the firm uses only debt and common equity in its capital structure. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 2m 98mvexolult.com $ 355 CONVE all of 293 25568 dal 29 21 shots A 4505 Sallo 600 ll 6 (
21-12 Working Capital Cash Flow Cycle Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. STrickler’s sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days, its annual cost of goods sold was $1,800,000. The firm had fixed assets totaling $535,000. Strickler’s payable deferral period is 45 days. a. Calculate Strickler’s cash conversion cycle b.Assuming Strickler hold negligible amounts of cash and marketable securities calculate its total assets turnover and ROA c. Suppose Strickler’s managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Strickler’s cash conversion cycle, total asset turnover, and ROA have been if the inventory turnover had been 9 for the year?

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