Estimate the value of the stock today

Assignment Help Financial Management
Reference no: EM132000779

A company has net income of $3 million, and it has 1 million shares outstanding. The company is expected to undertake two new projects. Project A will start from today, while project B will initiate 3 years from today. Project A will have a three years of life. The initial investment in project A is $1 million, and year 1, year 2 and year 3 cash flows are $500,000, $800,000 and $600,000 respectively. The initial investment in project B is $5 million. After that, project B is expected to provide a yearly cash inflow of $1.5 million in perpetuity (the first cash inflow of $1.5 million will occur one year after the initial investment). You estimate that the required rate of return is 12%. Using the NPVGO model, estimate the value of the stock today.

Reference no: EM132000779

Questions Cloud

Pay today to purchase one share of michael stock : How much are you willing to pay today to purchase one share of Michael's stock?
Future capital budgeting projects : The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects.
What is the standard deviation of your portfolio : The remainder of the investment is equally distributed between asset A and B. What is the standard deviation of your portfolio?
How much is non-market risk : How much of the risk of XYZ stock is market risk and how much is non-market risk?
Estimate the value of the stock today : A company has net income of $3 million, and it has 1 million shares outstanding. Using the NPVGO model, estimate the value of the stock today.
What is the market rate of return on stock : The common stock of Eddie's Engines, Inc. sells for $29.01 a share. What is the market rate of return on this stock?
Considering new three-year expansion project : Quint Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million.
Company unlettered cost of equity and what is its wacc : What is the company’s unlettered cost of equity and what is its WACC?
What is the required return on the company stock : If the company has a dividend yield of 6.9 percent, what is the required return on the company’s stock?

Reviews

Write a Review

Financial Management Questions & Answers

  How much must you remit for the purchase

How much must you remit for the purchase?

  What is the capital recovery of this equipment

What is the capital recovery of this equipment? What is the IRR of this equipment?

  Annual sales figure when evaluating project

What is the amount to use as the annual sales figure when evaluating this project?

  What will be the needed annual saving payments

A parent is interested in saving for college for their child was just born and will go to college in 18 years. what will be the needed annual saving payments?

  What is the net present value of cost stream

The net cost at the end of year 4 is $7,000. With an interest rate of 5%, what is the net present value of this cost stream at the begining of period 1?

  Any prospective young bride in his social circle

Mr. Darcy is a single man of good fortune, so good, in fact, that it allows him to sustain a lavish lifestyle simply on the interest he earns on his savings without ever having to work. Mr. Darcy has “ten thousand a year” as any prospective young bri..

  Annual return friendly earns on lending business

What is the effective annual return Friendly earns on this lending business.

  Company is evaluating possible replacement of equipment

A company is evaluating the possible replacement of equipment. What is the initial cash outlay necessary to replace the existing equipment?

  Support systems initiative will at minimum increase demand

Investing $2,000,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7%

  The index model has been estimated for stocks

The index model has been estimated for stocks A and B with the following results: What is the covariance between the returns on stocks A and B?

  The price of the bond will decline over time

If the yield to maturity remains constant, the price of the bond will decline over time.

  Underlying security at same exercise price and maturity

How does the profit profile compare with purchasing a call on underlying security at the same exercise price and maturity?

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