Estimate the reinvestment rate

Assignment Help Financial Management
Reference no: EM131835125

Caballos, Inc., has a debt to capital ratio of 14%, a beta of 1.76 and a pre-tax cost of debt of 5.9%. The firm had earnings before interest and taxes of $ 704 million for the last fiscal year, after depreciation charges of $ 255 million. The firm had capital expenditures of $ 358 million, and non-cash working capital increased by $ 74 million. The firm also had a book value of capital of $ 1.2 billion at the beginning of the last fiscal year. (The treasury bond rate is 3.4 %, the market risk premium is 5.7 % and the firm has a tax rate of 40 %). Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever. Estimate the Reinvestment Rate. Answer format is to 4 decimal places (0.1234).

Reference no: EM131835125

Questions Cloud

What is annual continuously compounded rate of interest : If the stock is currently priced at $58.20, what is the annual continuously compounded rate of interest?
Estimate the FCFF : Caballos, Inc., has a debt to capital ratio of 11%, a beta of 1.81 and a pre-tax cost of debt of 5.5%. Estimate the FCFF.
Estimate the cost of equity : Caballos, Inc., has a debt to capital ratio of 46%, a beta of 1.9 and a pre-tax cost of debt of 5.3%. Estimate the Cost of Equity.
What is the effective interest rate on libor loan : What is the effective interest rate on the LIBOR loan?
Estimate the reinvestment rate : The firm had earnings before interest and taxes of $ 704 million for the last fiscal year, Estimate the Reinvestment Rate.
Estimate the expected growth rate : Caballos, Inc., has a debt to capital ratio of 24%, a beta of 1.5 and a pre-tax cost of debt of 6%. Estimate the Expected Growth Rate.
Prepare thorough ratio analysis : Prepare a thorough ratio analysis (using as a minimum the applicable ratios from the textbook) for both UPS and FedEx.
Assume that the firm is in stable growth : Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.
What is present value of your windfall : What is the present value of your windfall if the appropriate discount rate is 10 percent?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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