Cox corporation has the following assets current assets...

Cox Corporation has the following assets: Current assets $3,700,000 Capital assets $8,500,000 Total assets $12,200,000 During 4 months of the year, current assets drop to $2,000,000 (total assets will then be $10,500,000). Its operating profit (EBIT) is expected to be $506,500. Its tax rate is 20 percent. Shares are valued at $25. Its capital structure is short‐term financing at 3 percent and long‐term financing of 40 percent equity, 60 percent debt at 5 percent. a. Calculate expected EPS if the firm is perfectly hedged. (Do not round intermediate calculations and round your final answer to 2 decimal places.) EPS $

Transcript

00:01 So, here in a question we have to calculate the price of per share for this first.

00:07 Let's calculate the f c f f at the year for using the information how we can calculate the formula we can use is ebit minus texas plus depreciation minus increase in net working capital minus capital spending now texas how we can calculate let's write the formulas first.

00:39 So here x rate multiply by ebit multiply by 1 minus x rate.

00:51 So text it is given 21 % now f c f f year 1 let's put the values we got texas first we have to find 0 .21 multiply by 3 to 50 triple 0 dollar multiply by 1 minus 0 .21.

01:24 So we got the value that is 527 775 to 5 lakh 27 thousand seven hundred seventy five dollar texas now for the f c f f.

01:43 So this is the amount 32 lakh 50 thousand dollar minus five lakh 27 thousand seven hundred seventy five dollar plus 260 thousand dollar minus 165 thousand dollar minus two hundred lakh sixty five thousand dollar.

02:13 So we got the amount which is 25 lakh 52 thousand two hundred twenty five.

02:23 So this is f c f f at year one now fails.

02:28 We have to given at the year five nominal value.

02:31 We can calculate now the ratio we need to calculate here.

02:39 So the ratio is equals to 29 000 multiply by 2 .5.

02:54 So we got 7 to 5 0 0 triple 0 now we have to calculate the present value.

03:07 So the formula is future value divided by 1 plus w acc to the power is 4 years.

03:16 Now, let's calculate pv of pv of c f f year 4.

03:31 So we got amounts to 5 to 2 to 5 divided by 1 plus 0 .088 to the power 4...