In cash flow estimation, the existence of externalities should be taken into account if those externalities have any effects on the firm's long-run cash flows.判断题

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The free cash flow to the firm is reported as $275 million. The interest expense to the firm is $60 million. If the tax rate is 35% and the net debt of the firm increased by $33 million, what is the free cash flow to the equity holders of the firm?

Question text 2Marks Wernham-Mifflin is considering launching a new line of pentagonal-shaped paper. You have the following information: • Revenues due to the sale of the new product are expected to be $90 million annually. • Total paper production costs will increase from the current level of $22 million annually to $63 million annually after the product launch. • Top sales agent Michael Scarn will be reassigned from other projects to sell the new product line. Sales of those other products are expected to decline by $12 million annually. • The project will make use of an existing paper mill, built last year at a cost of $38 million. The mill is being depreciated using prime cost over a useful life of 16 years. • Wernham-Mifflin currently pays taxes at a marginal rate of 26%. • Total annual incremental cash flows for the project are expected to remain constant for the next 16 years. After this period, the project’s total incremental cash flows will decline at a rate of 5% annually and will be received in perpetuity. What is the present value of the project in millions of dollars if the annual project discount rate is 6.0%? [Type only the final answer into the response box below (NOT into the Notes box) and in pure numeric format (e.g. 10 or -10). Do NOT use %/$ signs, commas or spaces (e.g. only enter 10 if it is 10 days/$10/10%)] Answer 4[input]Notes Report question issue Question 9 Notes

Question text 2Marks Al Corporation plans to finance a new investment with leverage. It plans to borrow $56 million to finance the new investment. The firm will pay interest only on this loan each year, and it will maintain an outstanding balance of $56 million on the loan. After making the investment, the firm expects to earn annual free cash flows of $12 million. However, due to reduced sales and other financial distress costs, the firm's expected annual free cash flows will decline to $11 million. The firm currently has 5.7 million shares outstanding, and it has no other assets or opportunities. Assume that the unlevered discount rate for the firm's future free cash flows is 8.9% and the firm's corporate tax rate is 30%. What is the firm's share price today (round it to the nearest dollar)? [Type only the final answer into the response box below (NOT into the Notes box) and in pure numeric format (e.g. 10 or -10). Do NOT use %/$ signs, commas or spaces (e.g. only enter 10 if it is 10 days/$10/10%)] Answer 3[input]Notes Report question issue Question 8 Notes

Question text 2Marks Al Corporation plans to finance a new investment with leverage. It plans to borrow $56 million to finance the new investment. The firm will pay interest only on this loan each year, and it will maintain an outstanding balance of $56 million on the loan. After making the investment, the firm expects to earn annual free cash flows of $12 million. However, due to reduced sales and other financial distress costs, the firm's expected annual free cash flows will decline to $11 million. The firm currently has 5.7 million shares outstanding, and it has no other assets or opportunities. Assume that the unlevered discount rate for the firm's future free cash flows is 8.9% and the firm's corporate tax rate is 30%. What is the firm's share price today (round it to the nearest dollar)? [Type only the final answer into the response box below (NOT into the Notes box) and in pure numeric format (e.g. 10 or -10). Do NOT use %/$ signs, commas or spaces (e.g. only enter 10 if it is 10 days/$10/10%)] Answer 3[input]Notes Report question issue Question 8 Notes

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