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(solution) Problem 1. ChemTech - Free Cash Flow 0 Chemtec is undertaking a


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Problem 1. ChemTech - Free Cash Flow 0

 

Chemtec is undertaking a project that will require an upfront

 

investment today in net working capital, and plant and equipment

 

(i.e., capital expenditures) of $100 million and $200 million,

 

respectively. If there are no revenues or expenses expected until

 

next year, what is the project's free cash flow today in millions of

 

dollars? *Make sure to input all currency answers without any currency

 

symbols or commas, and use two decimal places of precision. 2. Problem 2. ChemTech - Free Cash Flow 1

 

Continuing from Problem 1, at the end of the first year, Chemtec

 

is expecting sales of $250 million and costs of $125 million.

 

There are no more required investments in either net working

 

capital or plant and equipment. However, the existing plant and

 

equipment will experience

 

$50 million of depreciation. Assume that Chemtec's marginal tax

 

rate on earnings is 35%.

 

Assuming that all of these cash flow occur at the end of the first

 

year, what is the first year's free cash flow? *Make sure to input all currency answers without any currency

 

symbols or commas, and use two decimal places of precision. 3.

 

Problem 3. Jones - NPV

 

Jones Corp is evaluating a project that has the following annual

 

free cash flows: Period 0 1 2 Free Cash Flow ?150 100 150 If the project's discount rate is

 

project? 12%, then what is the NPV of the *Make sure to input all currency answers without any currency

 

symbols or commas, and use two decimal places of precision. 4.

 

Problem 4. Donald?s - IRR

 

Donald?s Inc. is evaluating a project that has the following annual

 

free cash flows: Period 0 1 Free Cash Flow ?175 200 What is the project?s IRR? *Make sure to input all percentage answers as numeric values

 

without symbols, and use four decimal places of precision. For

 

example, if the answer is 6%, then enter 0.0600.

 


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