please answer questions 5 and 6 for me. please show step by step on how...

80.2K

Verified Solution

Question

Accounting

please answer questions 5 and 6 for me. please show step by step on how to complete each question thank you
image
image
Crater Lake Manufacturing had the following financial statements for last year. All numbers are in thousands. 6,000(1+.25)60,0001.25=75,000 The company is experiencing a high rate of growth due to the introduction of some new products. The company expects sales to grow 25% this year. Develop pro forma financial statements for this year using the percent of sales method. Use an interest rate of 10% on the balance of debt at the beginning of the year. Assume assets, except the marketable securities which will remain unchanged, spontaneous liabilities, and operating costs increase by the same percentage as sales. Further, assume dividends will be 20% of net income. Assume additional funds needed will be covered by $20,000 of long-term debt and the remaining amount financed with notes payable. No new stock will be issued. Round all numbers to even thousands. After you have developed the financial statements for this year, answer the following questions. 5. Assume free cash flow in the year after this one in $5,000(FCF2) and the year after than is $10,000(FCF3). After year three, FCF grows forever at 6%. Calculate the value of operations. Assume the WACC is 12%. 6. What is the total corporate value

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students