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You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of 0.7, and a tax rate of 30 percent. Assume a risk-free rate of 4 percent and a market risk premium of 11 percent. Lauryn’s Doll Co. had EBIT last year of $44 million, which is net of a depreciation expense of $4.4 million. In addition, Lauryn's made $5.25 million in capital expenditures and increased net working capital by $3.3 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Continue the mercury recovery example from the lecture, assuming the company plans to invest in the Quicksilver device. Calculate the internal rate of return (IRR) for this investment. The company’s minimum acceptable rate of return (MARR) is 10%. Wo..
The stock of Alpha Company has an expected return of 16.25% and a beta of 1.35, and Gamma Company stock has an expected return of 10.50% and a beta of X. The beta of a portfolio P is 1.05. The portfolio P consists of 40% of the investment in Alpha an..
Why does a merchant care if a customer is purchasing products for business use or personal use?
Find the net payment on an equity swap in which party A pays the return on a stock index and party B pays a fixed rate of 6 percent. The notional amount is $10 million. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. ..
You try to price the put option on XYZ corp. Assume we live in a risk-neutral world where the returns on all assets are equal to the risk-free rate.
In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has..
Firms have long-run target dividend payout ratios. Dividend changes follow shifts in long-term, sustainable earnings. Managers are reluctant to make dividend changes that might have to be reversed.
Both large and small companies are using various forms of online marketing to promote and advertise their products and services. Imagine that you are an international marketing manager. In your opinion, what are some of the most successful ways to ut..
Time Value Personal Finance Problem Misty needs to have $23,000 at the end of 4 years to fulfill her goal of purchasing a small sailboat. She is willing to invest a lump sum today and leave the money untouched for 4 years until it grows to S23.000, b..
2000 is deposited into a newly opened fund on January 1, 1999. Another deposit is made into the fund on July, 1 1999. On January 1, 2000, the balance in the fund is 6000. The time-weighted rate of return in 1999 is 8.0% and the dollar-weighted rate o..
How would the quadrupling of the Swiss National Bank's foreign exchange holdings affect the demand and supply for Swiss francs and the exchange rate between the franc and the euro?
Suppose a semi-annual coupon bond has coupon rate of 3.5%, maturity of 10-years and price per $100 of face value equal to 106. What can you say about the relationship between the yield to maturity and the coupon rate?
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