Reference no: EM132007434
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 $150 million.
The capital expenditures for 2017 are expected to be $400 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 5% per year.
The required return on equity is 14%.
The WACC is 12%.
The market value of the company's debt is $5 billion.
90 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.
Reduce firm weighted average cost of capital
: In a world with taxes, interest tax shield tends to reduce a firm's weighted average cost of capital.
|
Accounts is treated as financing expense
: Which one of the following accounts is treated as a financing expense?
|
What is the size of the final payment
: Interest is 5% compounded semi-annually for the first two years, 6% compounded quarterly for next two years, What is the size of the final payment?
|
Management added to stockholder wealth over the years
: How much value has McLaughlin’s management added to stockholder wealth over the years, that is, what is McLaughlin’s MVA?
|
Corporate value model
: Using the corporate valuation model approach, what should be the company's stock price today?
|
Shares of the underlying stock do you need to buy or sell
: What is the price of the option? how many shares of the underlying stock do you need to buy or sell?
|
What is the current book value of the machine
: The machine could be sold today for $74,000. The depreciation to date is $38,200. What is the current book value of the machine?
|
The risk-free rate for all maturities
: The risk-free rate for all maturities (with continuous compounding) is 12%. What, to the nerest cent, is the three-year forward price?
|
What return did you realize on this one-year investment
: At what price will you sell the bond? What return did you realize on this one-year investment?
|