Compute the estimated stock price per share

Assignment Help Financial Accounting
Reference no: EM132903596

Question - A company has $100 million in assets and $40 million in debt. There are 1 million shares of stock outstanding. The cost of equity is 13% and the WACC is 10%. The firm expects the following free cash flow (in millions) for the next three years, after which it is expected to grow at a rate of 3% per year.

Year

FCFF

FCFE

1

10

7

2

12

10

3

15

12

Required -

a. Compute the estimated stock price per share by finding the total value of the firm (use the FCFF and the WACC as the discount rate) and subtracting out the value of the debt.

b. Compute the estimated stock price by using the FCFE and the cost of equity as the discount rate.

Reference no: EM132903596

Questions Cloud

How is explanatory research related to historiography : How is Explanatory Research related to Historiography?
What is Chris basis in new land acquired in distribution : On March 1, 2021, when Chris's basis in his partnership interest is $50,000, What is Chris's basis in the new land acquired in the distribution
What are the main concern areas for an alco : Describe major features that must be recognized when studying the management of bank capital and in relation to regulator's rules.
Identify some specific ethical or social responsibility issu : -Identify some specific ethical or social responsibility issues that might be faced by small-business managers and employees in one of the following areas
Compute the estimated stock price per share : Compute the estimated stock price per share by finding the total value of the firm (use the FCFF and the WACC as the discount rate)
Discuss the business ethics of amazon : Please Discuss the business ethics of Amazon selecting a second Headquarters.
What is the achieved upper deviation rate : During the year, Ingo Corporation has made 1,000,000 purchases of which 3,000 were over $25000. What is the achieved upper deviation rate
Calculate operating cash flows : Calculate operating cash flows using a 35 percent tax rate. If you have negative taxes, treat that as an immediate tax credit (positive CF)
Determine what is the break-even point in dollars : If the unit selling price is $55 and the variable cost per unit is $22 and the total fixed costs are $59,621, determine what is the break-even point in dollars

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the balance in retained earnings on december

The company received cash of $15,000 as an additional investment by its owners. What is the balance in retained earnings on December 31, 2016?

  Determine whether the omitted procedure is important

Determine whether the omitted procedure is important in supporting the auditors' opinion on the entity's financial statements. Engage another public accounting firm to conduct a quality assurance review.

  What is the approximate standard deviation of returns

What is the approximate standard deviation of returns if over the past four years an investment returned 8.0%, -12.0%, -12% and 15.0%?

  How the legal costs associated with the troubled debt

How the legal costs associated with the troubled debt restructuring should be recorded. Please provide the appropriate reference from the FASB Codification

  Risk-averse investor

The risk-free rate is 4%.  The expected market rate of return is 11%.  If you expect stock X with a beta of .8 to offer a rate of return of 12 percent, then you should.

  Record the issuance of common and preferred stock

Record the Issuance of Common and Preferred Stock.It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares

  How much interest will isabella pay

What is the APR on this loan? How much interest will Isabella pay over the full (60-month) life of the loan? Round the answer to the nearest cent.

  What is the control environment

What is the control environment? What is the relationship between the control environment and the other four components of internal control?

  What amount of gain on transfer should company recognize

On December 31, 2020, the company decided to transfer, What amount of gain or loss on transfer should the company recognize on December 31, 2020?

  Calculate the earnings per share

Issue 13% Debentures. Issue 250,000 ordinary shares of $1 each and $250,000 13% debentures. Calculate the earnings per share

  Hickory company manufactures two products

Hickory Company manufactures two products-13,000 units of Product Y and 5,000 units of Product Z. The company uses a plant wide overhead rate based on direct labor-hours.

  Classification of cost in to variable and fixed

Classification of cost in to variable, fixed, period, product, direct and indirect.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd