# ch10sol - CHAPTER 10 FROM EARNINGS TO CASH FLOWS Problem 1...

This preview shows pages 1–3. Sign up to view the full content.

CHAPTER 10 FROM EARNINGS TO CASH FLOWS Problem 1 a. Effective tax rate = 0.25! 12.5/50 After-tax operating income = 37.5 1 2 3 Terminal year EBIT (1-t) \$41.25 \$45.38 \$49.91 \$52.41 Reinvestment \$16.50 \$18.15 \$19.97 \$20.96 FCFF \$24.75 \$27.23 \$29.95 \$31.44 Terminal value \$524.08 Present Value \$22.30 \$22.10 \$405.10 Firm Value \$449.49 b. Marginal tax rate rate = 0.35 After-tax operating income = 32.5 1 2 3 Terminal year EBIT (1-t) \$35.75 \$39.33 \$43.26 \$45.42 Reinvestment \$16.50 \$18.15 \$19.97 \$20.96 FCFF \$19.25 \$21.18 \$23.29 \$24.46 Terminal value \$407.62 Present Value \$17.34 \$17.19 \$315.08 Firm Value \$349.61 b. Marginal tax rate rate = 0.25 After-tax operating income = 37.5 1 2 3 Terminal year EBIT (1-t) \$41.25 \$45.38 \$49.91 \$45.42 Reinvestment \$16.50 \$18.15 \$19.97 \$20.96 FCFF \$24.75 \$27.23 \$29.95 \$24.46 Terminal value \$407.62 Present Value \$22.30 \$22.10 \$319.94 Firm Value \$364.34 Problem 2 Year R&D Current \$50.00 \$50.00

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Dividend Discount Models 2 -1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

ch10sol - CHAPTER 10 FROM EARNINGS TO CASH FLOWS Problem 1...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online