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Hectoritis Corp. currently has an FCF of $13 million. A reputable analyst estimates that this FCF is anticipated to increase by 12% per year for the next 5 years. The analyst esti- mates that at the end of 5 years the company’s terminal value will be based on the year-5 FCF and a long-term FCF growth rate of 4%. Suppose the Hectoritis β= 1.5, the rf = 3%, the market risk premium E(rM )–rf = 14%, and Hectoritis has 8 million shares outstanding. How should the analyst value the shares of the company? Assume all cash flows occur at year end.
a. What is WACC? b. what is FCF in year 5? c. what is terminal value in year 5? d. what is share price?
An example of a collateralized bond is: Which of the following is a secondary market transaction?
A trader is considering purchasing one share of stock and writing two at the money call options. Explain why a trader may choose to exercise such a strategy.
The Miller Milk Company has just come up with a new lactose-free dessert product for people who can't eat or drink ordinary dairy products. Management expects the new product to fuel sales growth at 34% for about two years. What is the most you would..
What might she do to account account for risky future cash flows in her net-present-value analysis?
Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems: Find the required return for an asset with a beta of .90 when the risk-free rate and market return are 8% and 12% respectivley. Find the ?risk-..
Dinklage Corp. has 6 million shares of common stock outstanding. The current share price is $85, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $65 million, a coupon of 8..
You need to accumulate $100,078 for your son's education. You have decided to place equal year-end deposits in a savings account for the next 5 years. The savings account pays 4.24 percent per year, compounded annually. How much will each annual paym..
Which of the following should be included in the initial outlay?
Assume that LIBOR is expected to be 4 percent, 4.5 percent, and 5 percent at the end of each of the next three years, respectively.
Calculate the market premium. Calculate an investor’s required rate of return for the company’s shares.
_________are debt rated Ba or lower by Moody's or BB or lower by Standard & Poor's and are commonly used by rapidly growing firms to obtain growth capital, most often to finance mergers and takeovers.
An individual checking or savings account can be set up to go automatically to another person when the depositor dies if it is set up as a(n)
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