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Basic of Fcff

In: Other Topics

Submitted By EthanChin
Words 1045
Pages 5
Question 1a

Net Income2009 = (EBIT – Interest) (1-Tax rate)

= ($240,000 - $12,000) (1 - 0.20)

= $228,000 * 0.80

= $182,400

Net Income2010 = (EBIT – Interest) (1-Tax rate)

= ($280,000 - $16,000) (1 - 0.20)

= $264,000 * 0.80

= $211,200

Net Income2011 = (EBIT – Interest) (1-Tax rate)

= ($365,000 - $20,000) (1 - 0.20)

= $345,000 * 0.80

= $276,000

Dividend2009 = Net Income2009 – (Retained Earnings2009 – Retained Earnings2008)

= $182,400 – ($182,400 - $0)

= $0

Dividend2010 = Net Income2010 – (Retained Earnings2010 – Retained Earnings2009)

= $211,200 – ($393,600 - $182,400)

= $0

Dividend2011 = Net Income2011 – (Retained Earnings2011 – Retained Earnings2010)

= $276,000 – ($669,600 - $393,600)

= $0

Question 1b

Capital Investment2009 = ΔGFA2009 = GFA2009 – GFA2008 =$800,000 - $700,000 = $100,000

ΔWorking Capital2009 = ΔAR2009 – ΔInventory2009 – ΔAP2009

= ($200,000 - $0) + ($180,000 - $50,000) – ($150,000 - $0)

= $180,000

ΔNet Borrowings2009 = ΔLong-Term Debt2009 + ΔShort-Term Debt2009

= ($200,000 - $150,000) + ($0 - $0)

= $50,000

FCFE2009 = NI2009 – (Capital Investment –Depreciation) 2009 – ΔWorking Capital2009 + ΔNet

Borrowings2009

= $182,400 – ($100,000 - $60,000) - $180,000 + $50,000

= $12,400

Capital Investment2010 = ΔGFA2010 = GFA2010 – GFA2009 =$950,000 - $800,000 = $150,000

ΔWorking Capital2010 = ΔAR2010 – ΔInventory2010 – ΔAP2010

= ($250,000 - $200,000) + ($230,000 - $180,000) – ($200,000 - $150,000)

= $50,000

ΔNet Borrowings2010 = ΔLong-Term Debt2010 + ΔShort-Term Debt2010

=...

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