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WK6 Homework

# WK6 Homework - WEEK 6 HOMEWORK P11-1 Meltzer Electronics...

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1 WEEK 6 HOMEWORK P11-1. Meltzer Electronics estimates that its total financing needs for the coming year will be \$34.5 million. During the coming fiscal year, the firm's required financing payments on its debt-and-equity financing will total \$12.9 million. The firm's financial manager estimates that the operating cash flows for the coming year will total \$33.7 million and that the following changes will occur in the accounts noted. Account Forecast Change Gross fixed assets \$8.9 million Changes in current assets +2.3 million Changes in accounts payable +1.3 million Changes in accrued liabilities -0.8 million a. Use Equation 2.3 and the data provided to estimate Meltzer's free cash flow in the coming year, ( see pages 49-60 ) 24.6 million b. How much of the free cash flow will the firms have available as a source of new internal financing in the coming year, ( see pages 453-454 ) 25.6 – 12.9 = 11.7 million c. How much external financing will Meltzer require during the coming year to meet its total forecast financing need?, ( see pages 453-454 ) 35.4 – 11.7 = 22.8 million P11-2. West Coast Manufacturing Company (WCMC) is executing an initial public offering with the following characteristics. The company will sell 10 million shares at an offer price of \$25 per share, the underwriter will charge a 7 percent underwriting fee, and the shares are expected to sell for \$32 per share by the end of the first-day’s trading. Assuming this IPO is executed as expected, answer the following: a. Calculate the initial return earned by investors who are allocated shares in the IPO, ( see page 469 ) 32-25= \$7 or 28% return b. How much will WCMC receive from this offering, (

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WK6 Homework - WEEK 6 HOMEWORK P11-1 Meltzer Electronics...

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