1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Oksi-84 [34.3K]
3 years ago
5

A company forecasts free cash flow in next year to be $20 million, $25 million in second year, and 30 million in third year. Aft

er the third year, free cash flow will grow at a constant rate of 5 percent per year. If the overall cost of capital (WACC) is 10 percent, what is the current value from operations, to the nearest million
Business
2 answers:
Norma-Jean [14]3 years ago
8 0

Answer:

Current value from operations is $534.71 million.

Explanation:

The value from operations can be calculated by discounting back the free cash flow of the firm. The first three year's FCF will be discounted back using the WACC and when the growth rate o FCF becomes constant after Year 3, the terminal value will be calculated and discounted back too.

The current value from operations = FCF1 / (1+WACC) + FCF2 / (1+WACC)² + FCF3 / (1+WACC)³  +  [FCF3 * (1+g)  /  WACC - g] / (1+WACC)³

Current value from operations = 20 / (1+0.1)  +  25 / (1+0.1)²  +  30 / (1+0.1)³  +  [30 * (1+0.05) / (0.1 - 0.05)] / (1+0.1)³

Current value from operations = $534.71 million

Travka [436]3 years ago
6 0

Answer:

$535 million

Explanation:

Value of operations = present value of next 3 years FCF + present value of terminal value at end of 3 years

Terminal value at end of 3 years = Year 3 FCF * (1 + constant growth rate after 3 years) / (WACC - constant growth rate after 3 years)

Present value = future value / (1 + required return)number of years

The required return is the WACC

Value of operations = $535 million

You might be interested in
Dear Mr. Dunlap: Subject: Your Request for Invoicing Process Information I am happy to let you know that I can answer your quest
Lyrx [107]

Answer: False

Explanation:

It is not an effective beginning for a direct reply letter. Although the message does include a clear and specific subject line that is located below the salutation, it does not place the most important information first in the opening of the message

7 0
3 years ago
Crazy Mountain Outfitters Co., an outfitter store for fishing treks, prepared the following unadjusted trial balance at the end
Andrew [12]

Answer:

1. Dr Supplies expense $5,820

Cr Supplies $5,820

Dr Accounts receivable $3,900

Cr Earned fees $3,900

Dr Depreciation expense $3,000

Cr Accumulated depreciation $3,000

Dr Wages expense $2,475

Cr Wages payable $2,475

Dr Unearned fees $14,140

Cr Fees earned $14,140

2. Revenues $305,800

Expenses $261,800

Net income $44,000

3. Revenue $323,840

Expense $261,800

Net income $50,745

4. $6,745 Increase

Explanation:

1. Preparation of the journal entries necessary on April 30. 2019

Dr Supplies expense $5,820

Cr Supplies $5,820

($7,200-$1,380)

(To record supplies used)

Dr Accounts receivable $3,900

Cr Earned fees $3,900

(To record accrued fees Earned)

Dr Depreciation expense $3,000

Cr Accumulated depreciation $3,000

(To record equipment Depreciation)

Dr Wages expense $2,475

Cr Wages payable $2,475

(To record accrued wages)

Dr Unearned fees $14,140

Cr Fees earned $14,140

(To record fees earned)

2. Calculation to Determine the revenues, expenses, and net income of Crazy Mountain Outfitters before the adjusting entries.

REVENUE

Fees earned $305,800

EXPENSE:

Wages Expense $157,800

Rent Expense $55,000

Utilities Expense $42,000

Miscellaneous Expense $7,000

Expense $261,800

NET INCOME $44,000

($305,800-$261,800)

Therefore the revenues, expenses, and net income of Crazy Mountain Outfitters before the adjusting entries will be:

Revenues $305,800

Expenses $261,800

Net income $44,000

3. Calculation to Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. after the adjusting entries.

REVENUE

Fees Earned $305,800

Fees earned but unbilled $3,900

Unearned fees $14,140

Revenue $323,840

EXPENSE

Wages Expense $157,800

Rent Expense $55,000

Utilities Expense $42,000

Miscellaneous Expense $7,000

Supplies expense $5,820

Depreciation of equipment $3,000

Unpaid wages accrued $2,475

Expense $273,095

NET INCOME $50,745

($323,840-$273,095)

Therefore the revenues, expenses, and net income of Crazy Mountain Outfitters Co. after the adjusting entries will be:

Revenue $323,840

Expense $261,800

Net income $50,,745

4. Calculation to Determine the effect of the adjusting entries on Retained Earnings.

Effect of the adjusting entries=$50,745-$44,000

Effect of the adjusting entries=$6,745

Therefore the effect of the adjusting entries on Retained Earnings is Retained Earnings increases by $6,745

5 0
3 years ago
The field of accounting that focuses on providing information for external decision makers is.
kykrilka [37]
Levels tho i just need a new one to keep it in the bed with the baby baby girl baby
5 0
1 year ago
Over the years, the Securities and Exchange Commission (SEC) has delegated its statutory authority to establish accounting princ
dimulka [17.4K]

The delegated authority of the Securities and Exchange Commission (SEC) on establishing accounting principles for publicly traded companies in the United States impacts all <u>publicly held companies</u>.

<h3>What is the role of the SEC?</h3>

The Securities and Exchange Commission (SEC) is a well-recognized U.S. government oversight agency.

It is responsible for regulating the securities markets and protecting investors' investments.

It does this, by:

  • Maintaining fair, orderly, and efficient markets
  • Ensuring compliance with financial regulations
  • Ensuring transparency in financial reporting
  • Facilitating capital formation.

Thus, the delegated authority of the Securities and Exchange Commission (SEC) on establishing accounting principles for publicly traded companies in the United States impacts all <u>publicly held companies</u>.

Learn more about the Securities and Exchange Commission at brainly.com/question/3798508

3 0
2 years ago
Beginning inventory for the month contained 3,000 units that were 35% complete with respect to materials. 57,000 units were comp
notka56 [123]

Answer: 57,550 units

Explanation:

When using the weighted average method, the units completed and transferred out are assumed to include the opening inventory.

The weighted average equivalent units are therefore:

= Units completed and transferred out + Equivalent ending units

= 57,000 + (10% * 5,500)

= 57,000 + 550

= 57,550 units

6 0
3 years ago
Other questions:
  • Which sentence in the passage represents a safe work practice? Daisy and Norah are colleagues in a software company. A.Daisy slo
    15·2 answers
  • Which sentence from the scarlet lbis is foreshadowing
    13·1 answer
  • A contract clause which specifies the amount of damages to be paid in the event of a breach is called:
    11·1 answer
  • Sanderson Sofas, a family-owned corporation, issued 6.75% bonds with a face amount of $12 million, together with 2 million share
    6·1 answer
  • Laissez-faire is an economic: Multiple Choice precept because it is the logical conclusion of a model with widely held assumptio
    15·1 answer
  • The balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 11.75% bonds having a face amount of
    9·1 answer
  • Emma worked the following schedule:
    9·1 answer
  • Traditions Home Accessories Company manufactures decorative lamps using an activity-based costing system to allocate all manufac
    5·1 answer
  • Your assignment for this unit is to create a proposal to garner support from partners in your family business. You are an up-and
    5·1 answer
  • The product life cycle impacts marketing strategies in which way?.
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!