FIN515_Homework_6_Juan_M_Gutierrez - Homework Assignment 6...

FIN515_Homework_6_Juan_M_Gutierrez
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Unformatted text preview: Homework Assignment 6 Week # 6 Problems ( Pg.503) 12-1 AFN Equation 2010 2011 Sales expect to raise at 20% 5,000,000 6,000,000 Assets 3,000,000 ? liabilities 1,000,000 ? account payable 250,000 ? notes payable 500,000 ? accruals 250,000 ? after-tax profit margin (MS) 5% payout ration 70% Additional funds needed (AFN) = Projected increase in assets spontaneous increase in liabilities any increase in retained earnings AFN = 3,000,000 1,000,000- 500,000 1,000,000- $0.05 6,000,000 1- 0.70 5,000,000 5,000,000 AFN = 0.6 1,000,000- 0.1 1,000,000- 300,000 0.30 AFN = 600,000- 100,000- 90,000 410,000 Answer: the AFN is at $410,000 Problems ( Pg.549-550) 13-2 Value of of Constant Growth Firm 400,000 5% 420,000 WACC 12% 420,000 (12% - 5%) 420,000 7% Value of Operations: 6,000,000 Answer: the EMC's value of Operations is $ 6,000,000 13-3 Horizon Value Actual Projected 2010 2011 2012 2013 Free Cash Flow in millions $606.82 $667.52 $707.55 $750.00 first, find the growth rate, g = (750 - 707.55)/ 707.50first, find the growth rate, g = (750 - 707....
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