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You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.5, a debt-to-equity ratio of .4, and a tax rate of 30 percent. Assume a risk-free rate of 5 percent and a market risk premium of 7 percent. Lauryn’s Doll Co. had EBIT last year of $46 million, which is net of a depreciation expense of $4.6 million. In addition, Lauryn made $6.25 million in capital expenditures and increased net working capital by $3.6 million. Assume her FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Omit the "$" sign in your response.)
Firm value $ million
Dixie Tours Inc. buys on terms of 4/15, net 60. It does not take discounts, and it typically pays 35 days after the invoice date. Net purchases amount to $720,000 per year. What is the approximate percentage cost of its non-free trade credit?
When, where, and why did the Debt Crisis start?
Explain why points on a utility possibility curve represent efficient allocations of resources. Why must the utility possibility curve be downward sloping? Draw a utility possibility curve and show how it is possible to achieve efficiency by moving f..
Find an article that describes a company that did an IPO in 2015. Briefly describe the company and its industry, and provide: (i) the date of the IPO, (ii) the price at which shares were offered to investors, (iii) the price at the close of the first..
Jayadev Athreya has started on his first job. He plans to start saving for retirement early. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end of..
What is the difference between the expected rate of return and the required rate of return? What does it mean if they are different for a particular asset at a particular point in time?
Briefly explain the following statement: The standalone risk of an individual corporate project may be quite high, but viewed in the context of its effect on stockholders’ risk, the project’s true risk may be much lower.
Why do changes in reserve requirements have less predictable effects on the money supply in comparison to changes in open market operations? If a $10,000 par T-Bill has a 3.75% discount quote and a 90-day maturity, what is the price of the T-Bill to ..
A pension fund manager is considering three funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money fund that yields a sure rate of 3%. The probability distributions of the risky..
Sinking-Fund Provision : Explain the use of a sinking-fund provision. - How can it reduce the investor's risk?
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $92,000 for the firm during the first year, and th..
The Poseidon Swim company produces swim trunks. The average selling price for one of their swim trunks is $38. The variable cost per unit is $25. Poseidon swim has average fixed costs per year of $35,194.
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