Reference no: EM131322276
Corporate value model
Assume that today is December 31, 2016, and that the following information applies to Abner Airlines:
After-tax operating income [EBIT(1 - T)] for 2017 is expected to be $650 million.
The depreciation expense for 2017 is expected to be $80 million.
The capital expenditures for 2017 are expected to be $475 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 7% per year.
The required return on equity is 16%.
The WACC is 10%.
The market value of the company's debt is $5 billion.
290 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be the company's stock price today? Round your answer to the nearest cent. Write out your answer completely. For example, 0.00013 million should be entered as 130.
|
Which interval of production volume does breakeven occur
: A company asked one of their analysis team to analyze and create models that help decide whether they should manufacture a particular product or outsource its production. Build a spreadsheet model and then construct a one-way data table with producti..
|
|
Project for ultimate recreational tennis racket
: You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $350 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2;..
|
|
In order to develop an accurate static budget
: In order to develop an accurate static budget you know you need to get some facts. You ask around to see what kind of information you can gather. This is what you find out: The center pays rent of $12,000 per month. The center has a number of full-ti..
|
|
Nonconstant growth-what is the value of stock today
: Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from toda..
|
|
Corporate value model
: Assume that today is December 31, 2016, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2017 is expected to be $650 million. Using the corporate valuation model approach, what should be the c..
|
|
Different growth rates distort a comparative ratio analysis
: How might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems be alleviated?
|
|
What is the firm horizon or continuing and value
: Holt Enterprises recently paid a dividend, D0, of $2.25. It expects to have nonconstant growth of 21% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 12%. What is the firm's horizon, or continuing, value?
|
|
Describe what tax considerations
: Describe what tax considerations might cause you to set up a proprietorship or a partnership rather than a corporation when you start a business. Use a real business to explain your decision.
|
|
Which is more relevant pretax or the aftertax cost of debt
: Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wha..
|