Generate expected cash flows

Assignment Help Financial Accounting

Reference no: EM13826260

You are considering acquiring a firm that you believe can generate expected cash flows of $10,000 a year forever. However, you recognize that those cash flows are uncertain.

A. Suppose you believe that the beta of the firm is .4. How much is the firm worth if the risk-free rate is 4% and the expected rate of return on the market portfolio is 11%?

B. How much is the over value of the firm if its beta is actually .6?

Reference no: EM13826260

Questions Cloud

Computing stock price with no growth opportunities : One share of Jumanji Inc. currently sells for $42 per share and has just paid an annual dividend of $1.25 per share. The investors in Jumanji expect the stock to earn an annual rate of return of 12%.

Financial distress-what would be the beta of your portfolio : We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, −.2. Suppose you invested 90% of your wealth in the m..

What type of trade restrictions does the country use : The problem belongs to Economics and the problem is about a report on the 2008 National Trade Estimate Report on Foreign Trade Barriers on specific country.

Write a report on market segmentation for a business : Write a report on market segmentation for a business

Generate expected cash flows : You are considering acquiring a firm that you believe can generate expected cash flows of $10,000 a year forever. However, you recognize that those cash flows are uncertain. Suppose you believe that the beta of the firm is .4. How much is the firm wo..

Fair price of stock-expected annual rate of return : You are considering the purchase of some shares of PECO Inc. common stock which paid a dividend of $1.50 today. You expect the dividend to grow at the rate of 7% per year for the next 3 years, and then at 5% forever. The interest rate is 8%.

Weighted cost of capital for this new division : Faris currently has a capital structure of 40 percent debt and 60 percent equity, but is considering a new product that will be produced and marketed by a separate division. The new division will have a capital structure of 70 percent debt and 30 per..

Design a multiphase flow meter component : To research Literature review on the current Multiphase flow meters sensors in the oil and gas industry - design a multiphase flow meter component using CATIA V8, subjecting it to the loading modes in the marine environments.

Probability distribution to the price-rate of return : Seattle Best Company common stock is currently selling for $40 per share. Security analysts at Goldman Sachs have assigned the following probability distribution to the price of (and rate of return on) Seattle Best stock one year from now: Assuming t..

User Account

All Pages