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Cash Flow and Corp Evaluation

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Consider the following financial data for Rinaldi Ravioli for the most recent year (see attachment):

Sales = $100M
Labor and material expense = $50M
Depreciation = $20M
Interest expense = $5M
Tax rate = 40%
Capital expenditures = $22M
Receivables increased by $6M
Inventory increased by $1M
Payables increased by $3M
Short-term debt = $60M
The cost of capital is 12%
The company is in decline, and the expected growth rate in free cash flow is negative 3% per year forever
The company has excess cash of $6M and a piece of land that it is not using with an estimated value of $16M

(a)   Compute the free cash flow for the most recent year.
(b) Estimate the value of the enterprise.
(c) Estimate the value of the company's equity.

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Solution Summary

The solution computes the free cash flow for the most recent year, the value of the enterprise and the company's equity.

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