Reference no: EM133085673
Question - Corner Company is estimated to generate $ 18 million in available cash flow during the first year, and it is expected to grow at a constant rate of 5% per year. The company has no debt or preferred shares, and its weighted average cost of capital (WACC) is 9%. Calculate the value per share, considering that the company has $ 32 million in outstanding shares.
Find the nominal rate of return on a perpetual preferred share with a face value of $ 200, a dividend of 9% of the face value, and a current market price of $ 100.
Rome Corporation invests in the research and development department and will not pay dividends for years to come. Venetian Industries is interested in acquiring shares in Rome Corporation. The Venetian CEO has estimated Rome's available cash flows for the next 3 years: $ 7 million, $ 9 million, and $ 12 million. After the third year, available cash flow is expected to grow 5% steadily. Rome Corporation's weighted average cost of equity (WACC) is 7%, the market value of its debt and preferred shares total $ 60 million. Rome Corporation has $ 22 million of non-operating assets and 9 million common shares outstanding.
a. Calculate the present value of the expected available cash flows for the next 3 years.
b. Determine the market value of Rome Corporation's operations.
c. Calculate an estimate of the price per share of Rome Corporation.
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