[jjw165]

Last year, ABC had an EBIT of $5 million, depreciation of $1 million, interest of $1 million, and a tax of 40%. ABC has $14 million in non-interest-earning CA and $4 million in CL. It has $15 million in net P & E. The cost of capital is 10%. What is the net income? What is the net cash flow? What is the NOPAT? If the capital in the previous year was $24 million, what is the FCF this year? What is the EVA?

[jjw165]

ABC wishes to estimate its cost of capital. The current capital structure is 40% debt, 10% preferred stock, and 50% common equity. The debt's ytm is 8.3%. Preferred stock has a par of $70, and 8% dividend, and sells for $76. Beta is 1.05. The risk free rate is 4%, and the market return is 11.4%. The tax rate is 40%. What are the pre-tax component costs of capital? Which one should be used for investment decisions? What is the WACC before and after taxes?

[jjw165]

You are considering a machine that will cost $50,000 and which can be sold after 3 years for $10,000. $12,000 must be invested in working capital and will be recovered after year 3. Sales will be $50,000 a year. Operating costs will be 40% of sales. Depreciation will be $40,000, $5,000 and $5,000 each year. The tax rate is 40%. The r is 15%. What is the NPV?