Question

Cathey Corporation currently has sales of $1,000, which are expected to grow by 10% from Year...

Cathey Corporation currently has sales of $1,000, which are expected to grow by 10% from Year 0 to Year 1 and by 4% from Year 1 to Year 2. The company currently has an operating profitability ratio (OP) of 7% and a capital requirement ratio (CR) of 50% and expects to maintain these ratios at their current levels. The current level of total net operating capital (OpCap) is $510. Use these inputs to forecast free cash flow (FCF) for Years 1 and 2.

Cathey Corporation has a 12% weighted average cost of capital. Cathey’s free cash flows, estimated in the previous question, are expected to grow at 4% beginning at Year 2 and thereafter. What is the horizon value (use Year 2 for the horizon)? What is the current value of operations?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1.Ogier Incorporated currently has $900 million in sales, which are projected to grow by 8% in...
1.Ogier Incorporated currently has $900 million in sales, which are projected to grow by 8% in Year 1 and by 4% in Year 2. Its operating profitability (OP) is 7%, and its capital requirement (CR) is 65%. Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to two decimal places. What are the projected sales in Years 1 and 2? Sales in...
FCF Projections Ogier Incorporated currently has $760 million in sales, which are projected to grow by...
FCF Projections Ogier Incorporated currently has $760 million in sales, which are projected to grow by 10% in Year 1 and by 4% in Year 2. Its operating profitability (OP) is 8%, and its capital requirement (CR) is 75%. $1 million should be entered as 1, not 1,000,000. Round your answers to two decimal places. What is the projected FCF for Year 2?_______ What are the projected sales in Years 1 and 2? Sales in Year 1: $836 million Sales...
eBook FCF Projections Ogier Incorporated currently has $800 million in sales, which are projected to grow...
eBook FCF Projections Ogier Incorporated currently has $800 million in sales, which are projected to grow by 14% in Year 1 and by 8% in Year 2. Its operating profitability (OP) is 6%, and its capital requirement (CR) is 70%. Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to two decimal places. What are the projected sales in Years 1 and...
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the...
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of Bigger staff & McDonald (B&M), a privately held company owned by two friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million, which is expected to grow...
KK company has current sales of $1,000, current expected growth of 5%, and a WACC of...
KK company has current sales of $1,000, current expected growth of 5%, and a WACC of 10%. The company has profitability (OP=6%) but high capital requirements (CR=78%). What is the MVA of KK company based on the current growth of 5%?
Heavy Metal Corporation is expected to generate the following free cash flows over the next five​...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five​ years: Year 1 2 3 4 5 FCF​ ($ million) 51.8 67.6 77.2 75.2 81.3 ​Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.5%​: a.  Estimate the enterprise value of Heavy Metal. b.  If Heavy Metal has no excess​ cash,...
TRX Corporation is expected to generate free cash flows (FCF) of $6.7 million in year 1,...
TRX Corporation is expected to generate free cash flows (FCF) of $6.7 million in year 1, $9.99 million in year 2, $12.06 million in year 3, and $14.81 million in year 4. After then, the FCF will grow by 3% per year. TRX has 10 million shares outstanding, $4 million in excess cash, and it has $1 million in debt. If its cost of capital is 6%, the stock price would be $________? Input your answer without the $ sign...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($ millions) 53 68 78 75 85 After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%: A. Estimate the geometric mean growth rate (also known as CAGR=Compound Average Growth Rate) of...
1. Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts...
1. Assume Gillette Corporation will pay an annual dividend of $0.63 one year from now. Analysts expect this dividend to grow at 11.9% per year thereafter until the 66th year.​ Thereafter, growth will level off at 2.2% per year. According to the​dividend-discount model, what is the value of a share of Gillette stock if the​ firm's equity cost of capital is 8.9%​? The value of​ Gillette's stock is: ​(Round to the nearest​ cent.) 2. Portage Bay Enterprises has $3 million...
A firm’s dividends for this year are $1.25 Millions.  Dividends are expected to grow at 10% for...
A firm’s dividends for this year are $1.25 Millions.  Dividends are expected to grow at 10% for years 1-3, 30% for years 4-6, 10% for years 7-8, and 4% thereafter. The cost of capital is 15 percent. What is the terminal value at constant growth? What should be the value of the company today? (you need to mention the inputs on your financial calculator)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT