Estimate the enterprise value of the company with growth

Assignment Help Financial Management
Reference no: EM131603124

Thomas Steel is a publicly traded steel company with an ageing steel plant. Thomas Steel is considering to upgrade existing plant (CAPX) by investing $ 2 million today: $0.4 million can be depreciated each year. The upgrade will increase the annual pre-tax operating income to $ 6 million. It requires ongoing net working capital of $0.5 million per year. The marginal tax rate is 35% and the cost of capital is 11% with a growth rate of 2%.

a. Estimate the FCF

b. Estimate the enterprise value of the company with 2% growth.

c. What is the stock price if there is 1 million share outstanding, $2 million in debt and $0.5 million in cash?

Reference no: EM131603124

Questions Cloud

Make the two investments equally attractive : Determine the percent change in the annual expenses for Alternative I that would make the two investments equally attractive.
Compare the after-tax equivalent uniform annual cost-euac : Compare the after-tax equivalent uniform annual cost, EUAC, of the defender (keeping the pumping station) to the challenger (sell station to the city).
Operating income-tax rates and business risk : Two operationally similar companies, Heavy and Light, have identical amounts of assets, operating income (EBIT), tax rates, and business risk.
Valuation of an it firm based on free cash flow to the firm : You are performing a valuation of an IT firm based on free cash flow to the firm (FCFF). What is the value of the firm based on the discounted value of FCFF?
Estimate the enterprise value of the company with growth : Thomas Steel is a publicly traded steel company with an ageing steel plant. Estimate the enterprise value of the company with 2% growth.
Exclusive projects consisting of reinforcing dams-levees : Five mutually-exclusive projects consisting of reinforcing dams, levees, and embankments are available for funding by a certain public agency.
Calculate value of the difference in annual costs : calculate the value of the difference in annual costs: EUAC (challenger)-EUAC(defender) = EUAC (Machine B) - EUAC (Machine A).
Should project be implemented if requires rate of return : Firm AAA is considering a 3-year project with an initial cost of $960,000. Should this project be implemented if its requires rate of return of 14 percent? Why
Determine the benefit-cost ratio based on present worth : Determine the benefit-cost (B-C) ratio based on present worth for this project.

Reviews

Write a Review

Financial Management Questions & Answers

  Determine how firms valuation using the earnings

Determine how a firm’s valuation using the earnings-based valuation method would be impacted when using aggressive versus conservative accounting.

  What is the amount of the next interest payment

A bond is priced at $1,100, has 10 years remaining until maturity, and has a 10% coupon, paid semiannually. What is the amount of the next interest payment?

  Calculate the growth rate of listed dividends

Calculate the growth rate of above listed dividends. Using CAPM determine the maximum cash price that Wiser should pay for each share of S&S

  Financial planner with first citizens investment services

you have just landed a lucrative job as Financial Planner with First Citizens Investment Services (FCIS), major financial services company in your home country.

  Find net present value of these cash flows for discount rate

A Pharmaceutical manufacture has projected net profits for a new drug that is being released to the market over the next five years: Use a spreadsheet to find the net present value of these cash flows for a discount rate of 3%.

  The project yields nominal returns

A project costs $1500 immediately. The project yields nominal returns of $200 in years 1 and 2, $250 in years 3 and 4, and $300 in year 5. In addition, the project will have capital worth $600 (in nominal $) left over at the end of year 5. The real d..

  Friedman position on corporate responsibility

Which of these statements epitomizes Milton Friedman’s position on corporate responsibility?

  Competitive strength assessment and financial analysis

As part of your internship requirements with Apple Inc., you have been asked to prepare an analysis of Apple’s competitive position in the markets for computers, digital media players, smartphones, and tablet computers. Your executive summary of reco..

  What is the range of possible values for pacificorp

what is the range of possible values for PacifiCorp? What questions might you have about this range?

  What is the future value of these investment cash flows

Trigen Corp. management will invest cash flows of $1,232,048, $704,110, $1,253,154, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 7.45 percent, what is the future value o..

  Upcoming payments in plain vanilla interest swap

Determine the upcoming payments in a plain vanilla interest swap in which the notional principal is $70 million.

  What is the effective annual rate and shop report

Ricky Ripov’s Pawn Shop charges an interest rate of 16 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. Requirement 1: What rate should the shop report? What is the effective annual rate?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd