The capital asset pricing model is used to calculate the effect of increase in prices of capital assets due to inflation.

Mays Corp. reported free cash flows for 2018 of $491 million and investment in operating capital of $321 million. Mays Corp. inc

Anon25 [30]

Answer: $975 million

Explanation:

Given the above details, we can solve for Earnings Before Tax and Interest with the following formula,

Operating Cash Flow = EBIT – Taxes on EBIT + Depreciation

Making EBIT the subject would turn it to be,

EBIT = Operating Cash Flow + Taxes on EBIT - Depreciation

We have all of the above except the EBIT and Operating Cash Flow.

Luckily we can solve for the Operating Cash Flow with the details given using,

Operating cash flow = Free Cash Flow + Investment in operating capital

Therefore,

= $491 million + $321 million

= $812 million

Operating cash flow is $812 million

Plugging it into the original formula we have,

EBIT = Operating Cash Flow + Taxes on EBIT - Depreciation

EBIT = $812 million + $309 million - $146 million

EBIT = $975 million

Earnings before Taxes and Interest is $975 million.

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5 0

3 years ago

Disney gets its cast members to go out of their way to make people happy by valuing its employees like internal customers, which

Zigmanuir [339]

The process Disney uses as getting their employees to go out of their way to make people happy by means of valuing employees as if they were internal customers is called internal marketing. Internal marketing is a process that can only happen within a company or organization. The base idea of it is to align the employees with the business through motivation and through empowerment of employees at all levels to push them to deliver rewarding experiences to customers.

5 0

3 years ago

Prox Inc. is a U.S.-based manufacturer of consumer electronics. It decides to export to Mexico and wants to protect its goods ag

Alina [70]

Prox Inc. is a U.S.-based manufacturer of consumer electronics. It decides to export to Mexico and wants to protect its goods against damage, loss, and pilferage. The document which is applicable here is an A. insurance certificate.

Explanation:

A certificate of insurance is a document used to provide information on specific insurance coverage.
The certificate provides verification of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies' effective periods
Certificate of Insurance is a summary document usually issued by an agent on behalf of an insurer that says a policy has been issued to an insured for a general type of risk.
The Certificate is usually issued to a third party who wants some evidence or assurance that a policy has been issued.
A certificate of insurance is requested when liability and large losses are a concern.
Most commercial leases require the tenant to provide certificates of insurance or other evidence of insurance. Certificates of insurance are typically issued by an agent or broker for the named insured and set forth the coverages written for the insured

5 0

3 years ago

Standard, Inc. reported EBIT of $35 million for last year. Depreciation expense totaled $20 million and capital expenditures cam

aleksandr82 [10.1K]

Answer:

$710.84 million

Explanation:

Net income = $35 million

Depreciation = $20 million

Capital expenditures = $7 million

Tax rate = 21%

D/E ratio = 0.4

Growth rate = 6%

Equity beta = 1.25

So, firm's asset beta = Equity beta/(1 + D/E*(1-T))

= 1.25/(1 + 0.4*(1-0.21))

= 0.94985

So, Free Cash Flow to the Firm= NI + Depreciation - Capital expenditures

= 35 + 20 - 7

= $48 million

Risk free rate Rf = 5%

Market risk premium = 7.5%

So, firm cost of capital using CAPM is Rf + Beta*(MRP)

Kc = 5 + 0.94985*7.5

Kc = 12.1239

So, Firms value using constant dividend growth model:

FV = FCF*(1+g)/(Kc-g)

FV = 48*1.06 / 0.121239-0.06

FV = 50.88 / 0.061239

FV = 830.8430901876255

FV = $830.84 million

Debt = $120 million

Market Value of equity = FV - Debt

Market Value of equity = $830.84 million - $120 million

Market Value of equity = $710.84 million

6 0

2 years ago

On January 1, 2021, Legion Company sold $250,000 of 6% ten-year bonds. Interest is payable semiannually on June 30 and December

notsponge [240]

Answer:

The bond interest expense to be shown in profit or loss as t 30 June 2021

$9,838.56

Explanation:

The bond interest expense is the actual finance cost of using the funds made available by bondholders while the coupon payment is the portion of the finance cost paid to them periodically.

Interest expense=bonds cash proceeds*yield to maturity*6/12

bonds cash proceeds is $163,976

yield to maturity is 12%

interest expense=$163,976*12%*6/12=$9,838.56

5 0

2 years ago

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