/servlet/quiz?quiz action-takeQuiz&quiz; probGuid-QNAPCOA801010000004194edf00a00
ID: 2616554 • Letter: #
Question
/servlet/quiz?quiz action-takeQuiz&quiz; probGuid-QNAPCOA801010000004194edf00a00008ctx-Fan.He-0027&ck-m; The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value-added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFs) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model Randall and Arts Inc. has an expected net operating profit after taxes, EBIT(1-T), of $9,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,410 million, and net operating working capital (NOWC) is expected to increase by $50 million. How much free cash flow (FCF) is Randall expected to generate over the next year? and Arts Inc. O $7,940 million O $8,040 million $212,233 million $10,760 million Randall and Arts Inc.'s FCFs are expected to grow at a constant rate of 3.18% per year in the future. The market value of Randall and Arts Inc.'s outstanding debt is $56,179 million, and preferred stocks' value is $31,211 million. Randall and Arts inc. has 750 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 9.54%. Using the preceding information and the FCF you calculated in the previous question, calculate the erw Value (Millions) Total firm value Value of common equity Intrinsic value per share appropriate values in this table. (Hint: You can assume that the firm does not have any nonoperating assets on its balance sheet.)Explanation / Answer
Q 1) Answer choice : A
Free Cash Flow = EBIT ( 1-Tax) - Capital Expenditure - Change in Working Capita
Randall & Arts Inc. Free Cash Flow S.No Details Amount $(Millions) 1 EBIT (1-Tax) 9,400 2 Capital Expenditure -1,410 3 Increase in Net Working Capital -50 Answer Free Cash Flow (1+2+3) 7,940Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.