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Suppose you have been asked to estimate the value of two privately held companies that don’t pay any dividends. The first company is in a mature industry. The company currently has free cash flow of $24 million and it is expected to grow at a constant rate of 5%. Its WACC is 11%. The company owns marketable securities of $100 million. It is financed with $200 million of debt, $50 million of preferred stock, and $210 million of book equity. It currently has 10 million shares of stock. The second company is in a growing industry. The company has recently borrowed $40 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. It is expected that the company will produce free cash flows of –$5 million in one year, $10 million in two years, and $20 million in three years. After three years, free cash flow will grow at a rate of 6%. Its WACC is 10% and it currently has 10 million shares of stock. Using the data provided, you are required to answer the following questions: a) Explain how to use the corporate valuation model to find the price per share of common equity.
Last year the selling corporation had earnings before interest and taxes (operating income) equal to $1 million. it paid $200,000 in dividends to its stockholders and $100,000 in interest to its creditors. During the year, the company also repaid a b..
Broussard Skateboard's sales are expected to increase by 15% from $7.8 million in 2015 to $8.97 million in 2016. Its assets totaled $5 million at the end of 2015. Baxter is already at full capacity, so its assets must grow at the same rate as project..
A bond with 20 years until maturity has a coupon rate of 7.4 percent and a yield to maturity of 7.5 percent. What is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your resp..
You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. what is the current dividend per share? ?
Search on the internet for Pro-forma financial statements of any large public company from last year (e.g. Coca-cola, Home Depot, etc). Compare these to the results by looking at the actual financial statements.
What type of audit opinion was given for the financial statements and the internal financial controls of Intel?
Which of the following statements about bonds is true? Bond prices move in the same direction as market interest rates. If market interest rates change, long-term bonds will fluctuate more in value than short-term bonds. Long-term bonds are less risk..
How much will you have in the account in 3 years? How much will you have in the account in 6 years?
What is required is that you compare figures from this trial balance to figures for a company called AUTOTRADER, and state why the figures are different.
Suppose you're going to save for retirement over 30 years, monthly instalments. Your investments fund has been averaging at 8% per year. You would like your investment fund to last you 25 years. If you would like to pull out $3,500 per month after re..
Given an anticipated inflation premium of 1.40% and a real rate of interest of 4.14%, what is the nominal interest rate? Round your answer to 4 decimal places.
The Company is considering a change in it’s credit standards. The company sells currently 10 000 units of Technotron. The sales price is 20€. The variable cost is 60% of the sales price. The relaxation of the credit standards should result in 15% sal..
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