The Income Statements for Infonext Corporation for 2007 and 2008

question 43

Multiple Choice

The income statements for Infonext Corporation for 2007 and 2008 are provided below:
-Refer to the information above. Assume sales will grow at the same rate as they did last year and that depreciation is expected to increase to $850 and interest expense to $1,370. Also
Assume the tax rate will remain a flat 40% in 2009. Gross plant, property, and equipment is
Expected to increase by 6.8% and will be the only investment cash flow. Infonext's additional
Investment in net working capital is expected to be 2% of the change in sales. The cost of capital
Is 14%, and Infonext's 2009 cash flows are expected to remain at that level forever. Calculate
Infonext's terminal value at the end of 2009. Round your answer to the nearest thousand
Dollars.

• A)$25,586
• B)$29,720
• C)$28,002
• D)$25,900

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Definitions:

Investing Activities

Financial actions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Operating Activities

Business activities directly related to the production and delivery of goods and services, affecting the firm's cash flow.

Financing Activities

Transactions related to a company's funding, including issuing debt, repaying loans, or dividend payments.

Issuance

The process of making securities available for sale by a company, typically involving stocks or bonds.