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Barrett Industries invests a large sum of money in R & D; as a result, it retains and reinvests all of its earnings. In other words, Barrett does not pay any dividends and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Barrett's stock. The pension fund manager has estimated Barrett's free cash flows for the next four years as follows: $3 million, $6 million, $10 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 7% Barrett's WACC is 12%, its debt and preferred stock total $60 million, and it has 10 million shares of common stock outstanding. Required: a) Determine Barrett's enterprise value b) Estimate Barrett's price per share of common stock.
Last month, Rick's Bike Shop, Inc. increased the price on the 22-ounce can of Camp A bearing grease by 2.5 percent. In response, sales dropped by 10 percent. A) Calculate the point price elasticity of demand for Camp A bearing grease.
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $5 and the government wants to put a tax on it to reduce smoking by 20%, what should be the size of the tax per pact of cigare..
Since you are not an expert on this type of equipment, you hire a consulting firm to make recommendations. The consultant charged you $1,500 and recommended the purchase of the latest model from Equipment Corp. of America.
Consider a market with the following supply and demand curves: Qd= 100-4p Qs=p-10 Suppose the government imposes on the buyer a tax of 5 dollars for each unit sold. What is the tax revenue raised and deadweight loss following the imposition of the..
determine the present equivalent value of $400 paid every three months over a period of seven years in each of the follwing situations: a) the interest rate is 12% componded annualy. b) the interest rate is 12% compounded qarterly.
Solve Tracy's problem of how often to go to the ATM when the nominal interest rate on her bank account is 10 percent, she spends $30 each day, it costs her $.50 each time she uses the ATM, and she thinks that there is a 15 percent chance.
Jones Company operates within a monopolistically competitive industry. The estimated demand for its products is given by the following inverse demand function P = 1760 - 12Q It finance department has estimated its total cost function as TC = 24,00..
The table below shows the total cost of cleaning classrooms at various outputs: 5. Classrooms cleaned per evening 0 3 4 7 8 12 13 16 17 Total cost $100 $200 $240 $300 $330 $400 $440 $500 $600 a) Calculate fixed and variable costs of cleaning 0, 3,..
Nucor Corp manufactures generator coolers for nuclear and gass turbine power plants. The company completed a plant expansion through financing that had a debt/equity mix of 40-60. If %15 million came from mortgages and bond sales, what was the to..
Now suppose the city council of Metropolis decides to curb congestion in the downtown area by limiting the number of taxis to 6. Applicants participate in a lottery and size winners get a medallion (a permanent license). What is the new equilibriu..
refer to the following matrix, where each entry shows the level of utility attained by group members from following a particular strategy. Cooperate Shirk Cooperate 10,8 5,4 Shirk 6,10 8,7 If there is as..
Create an inverse demand of P = a - bQ, inverse demand of P = 11 - 2Q. a) Calculate the marginal revenue (MR). b) Find the quantity and price which maximize profits when marginal cost is zero (round off to two decimal places for any number that is ..
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