Reference no: EM13811844
1) Value of Operations
Jendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. the company’s weighted average cost of capital is 12%
What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.)
Calculate the value of Kendra’s operations.
2) Black-Scholes Model
Assume that you have been given the following information on Purcell industries:
Current stock price= $15 Strike price of option=$15
Time to maturity of option=6 months Risk-free rate= 6%
Variance of stock return =0.12
d1=0.24495 N(d1)= 0.59675
d2=0.00000 N(d2)=0.50000
According to the Black-Scholes option pricing model. What is the option’s value?
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: Jendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. the company’s weighted average cost of c..
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