1.     (Dividend policy and free cash flow to equity)

NanoSoftis a softwarefirm that has never paid a dividend before but its boards of directors isconsidering whether to initiate dividends and if so, how much topay. You havecollected the following information on the firm:

-The most recent year’s income statement is as follows:

Revenues            $500 million

- Cost of goods sold   $350 million (includes depreciation of $40 million)

EBIT                    $150 million

- Interest expense     $10 million

Taxable income  $ 140million

- Taxes         $ 42million

Net Income               $98 million

-The revenues, operating income and depreciation are expected to grow 8% ayearfor the next 3 years, but the tax rate for the company will increase to 40%of taxable income.      

- Thenon-cash working capital is currently 20% of revenues and this ratio isexpectedto not change over the next 3 years.

-The firm reported gross capital expenditures of $ 50 million last year, a levelthat will bemaintained for the next 3 years.

-The firm has an old fixed rate bank loan of $ 100million (which is the firm’s only debt) and it is expected to pay offthe entire loan at the end of year 2. The firm does notplan any new borrowings for the next 3 years.

-The firm is planning one major acquisition next year and it expects theacquisition to cost $ 50 million. There are no other acquisitions planned forthe next 3 years.

-The current cash balance of the firm is $ 75 million.

Questions:

a.      Estimatethe FCFE for the firm each year for the next 3 years.

b. Now assume thatthe firm wants to initiate dividend payments. Assuming that it wants to end up with a cash balance of $ 50 million at the end of thethird year, what is the amount ofdividends that the company would be able to pay out to it’s stockholders?

或是求助，这道题里的100million 的Debt在接下来的两年是怎么分配的？