Q1.  ABC’s the most recent free cash flow (FCF0) is $200 million.  The free cash flow is expected to grow at a rate of 40 percent in next year and 10 percent in the second year. After two years, it is expected to grow forever at a constant rate of 6 percent.  The cost of common stock (rs) is 10% and the weighted average cost of capital (WACC) is 8%.  What is terminal value (horizon value, HV2) at the end of year 2?

Q8. You have been given the attached information on the ABC Company.  ABC expects sales to grow by 30 percent in 2019 and operating costs should increase in proportion to sales.  Fixed assets were being operated at 90 percent of capacity in 2018, but all other assets were used to full capacity. Underutilized fixed assets cannot be sold.  Current assets and spontaneous liabilities should increase in proportion to sales during 2019.  The company plans to finance any external funds needed as 40 percent notes payable and 60 percent long-term debt.  The interest rate is 8 percent and you can assume that interest expenses will be paid at the beginning of the year.  That is, interest expenses for 2019 will be based on the amount of debt at the end of 2018.  The dividend payout ratio (50%) will remain constant.    Information on the ABC Company:                                              Year 2018       Sales                                  $1,000.00 Operating costs                     800.00                      EBIT                                  $  200.00 Interest                                    15.00                      EBT                                    $  185.00 Taxes (40%)                              74.00                      Net Income                        $  111.00 Dividends (50%)                      55.50                      Add’n to R.E.                     $     55.50                                                                   December 31, 2018       Current Assets                 $  700.00 Net fixed Assets                   300.00                      Total assets                       $1,000.00                        A/P and Accruals              $  150.00 N/P                                         100.00 Long term debt                    100.00 Common stock                     150.00 Retained earnings                500.00                      Total Liab & Equity           $1,000.00                        Calculate Additional Funding Needed (AFN).          

I (wake) too late yesterday.

Q 22. WACC of the firm is 12% and the ROIC (return on invested capital) for the current year is 15%.  The company grows at 30% this year.  Does the high growth rate contribute the value of the firm?

The trip (take) thirty-three and a half hours.

I (read) your email, but I didn’t have time to reply.

The news (spread) around Italy fast.

Last Saturday Carl (go) to the supermarket.

Last weekend we (have) fun.

Their business (begin) as a small company that fixed radios.