Description
Use Microsoft Excel to show all work.Remember, failure to show work will result in no partial credit awarded. Your work is to only represent your thoughts and effort, not those of others.
Unformatted Attachment Preview
Purchase answer to see full attachment
Explanation & Answer
Hi,PFA. Thanks!
Ans 1
The time value of money principle states that a dollar today is worth more than a dollar year later. Hence
it is necessary to determine the present value of all future payments to determine their worth today.
The risk or uncertainty of a cash flow is measured by the discount rate which increases as risk increase.
Hence, as risk increases, the discount rate increases and the present value of cash flow decreases
Thus, as risk increases, investors will be willing to pay less for the stock today
Ans 2
1)
2)
3)
NOPAT = EBIT*(1-tax rate)
Add: Depreciation
OCF
Less: Increase working capital
Less: Capital expenditure
Free cash flow from operations
$4,515,720
2,212,000
6,727,720
(322,000)
(4,273,000)
$2,132,720
The uses of free cash flows were
Payment of dividends of $3.1 million
Repayment of debt by (1823-409) i.e. $1.414 million
Interest payment of $.18 million
Ans 3
Industry (2018)
Current Ratio
Quick Ratio
Avg...