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MANAGERIAL FINANCE PROJECT week 7 - MANAGERIAL FINANCE...

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MANAGERIAL FINANCE PROJECT #2 13-10 A. 1. Net Operating Profit after Taxes (Operating Income x (1-Tax Rate) NOPAT for 2011 = 108.6 (1-.40)=$65.16 • 2. Net Operating Working Capital for 2011 is calculated through Taking your Current Assets less – Non-Interest Bearing Current Liabilities NOWC for 2011 = ($5.6 + $56.2 + $112.4) – ($11.2 + $28.1) = $134.9 million. 3. Net Capital for 2011 is calculated the sum of NOWC (already shown as) 134.9 million + Net Fixed Assets (2011 Projected PP&E) of 397.5 = Net Capital for 2011 of = $134.9 + $397.5 = $532.4 million. • 4. Free Cash Flow for 2011 is obtained through NOPAT less – Investment in Capital = $65.16 – ($532.4 - $502.2) = $65.16 - $30.2 = $34.96 million is the Free Cash Flow as of 12/31/2011. • B. Page 547 of the text states that terminal, or horizon, value is the value of operations at the end of the explicit forecast period. It is also called the continuing value, and it is equal to the present value of all free cash flows beyond the forecast period, discounted back to the end of the forecast period at the weighted average cost of capital. HV is = to Free Cash Flow for 2011 = 34.96 * Growth Rate of 6% / Weighted Average Cost of Capital 11% less – the growth rate of 6%. HV
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