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Following is a four-year forecast for Torino Marine. Year 2015 2016 2017 2018 Free CFs in million -76 92 112 150 a. Estimate the fair market value of Torino Marine at the end of 2014. Assume that after 2018, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine’s weighted-average cost of capital is 15 percent and its tax rate is 34 percent. b. Estimate the fair market value per share of Torino Marine’s equity at the end of 2014 if the company has 40 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $230 million. c. Now let’s try a different terminal value. Estimate the fair market value of Torino Marine’s equity per share at the end of 2014 under the following assumptions: (1) Free cash flows in years 2015 through 2018 remain as stated earlier. (2) EBIT in year 2018 is $200 million, and then grows at 7 percent per year forever. (3) To support the perpetual growth in EBIT, capital expenditures in year 2019 exceed depreciation by $50 million, and this difference grows 7 percent per year forever. (4) Similarly, working capital investments are $15 million in 2019, and this amount grows 7 percent per year forever.
Because of expenses, the new product development stages for convenience goods should be reduced to idea generation, screening, and then, product development and commercialization (national roll-out).
If Kruger requires a 12 percent rate of return on investments of this type, what value would Kruger place on the McIntyre stock?
How much money must you pay into an account at the end of each of 20 years in order to have $100,000 at the end of the 20th year? Assume that the account pays 6% per year, and round to the nearest $1. a. $2,718 b. $2,195 C. $1,840 d. $2,028.
How do I figure out this problem? Johnson's Nursery has net income of $42,500, depreciation expense of $1,800, interest expense of $900, taxes of $1,600, additions to net working capital of $2,300, and capital expenditures of $11,700. What is the amo..
Which of the following would not be part of primary bank capital?
If an investor purchases shares in a no-load fund for $36, receives cash distributions of $1, and redeems the shares after one year for $42, what is the percentage return on the investment?
Investor buys a stock today assuming to resell it one year from now for $70. Dividend expected to be paid in one year is $10. If required rate of return is 25%, how much the investor is ready to pay for the stock today? That is, what is the PV of fut..
The one-year interest rate is 6% in the United Kingdom, 2% in Switzerland, and 4% in the United States. What is your expected spot rate of the Swiss franc in one year with respect to the US dollar? Show your work.
Uses historical financial statements to measure a company's performance and in making financial projections of future performance Relies on generally accepted accounting principles to make comparisons between companies valid. uses historical financia..
Green Valley company bonds have a 10.66 percent coupon rate. Interest is paid semi annually. The bonds have a par value of $1000 and will mature 16 years from now. Compute the value of Green Valley company bonds if investors' required rate of return ..
University Corp. issued five-year bonds that pay a coupon of 6.5 percent semi annually. The current market rate for similar bonds is 5.5 percent. How much will you be willing to pay for University's bond today?
Suppose two year treasury bonds yield 5%, while 1 year bonds yield 3%, risk free rate (r*) is 1% and the maturity risk premium is zero. a. Using the expectations theory, what is the yield on a 1 year bond 1 year from now? b. What is the expected infl..
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