Using the free cash flow valuation model

Assignment Help Financial Management
Reference no: EM131186299

The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Beyond 2020 to infinity, the firm expects its free cash flow to grow by 3% annually. Year (t) Free cash flow (FCFt) 2016 $200,000 2017 250,000 2018 310,000 2019 350,000 2020 390,000 a. Estimate the value of Nabor Industries’ entire company by using the free cash flow valuation model. b. Use your finding in part a, along with the data provided above, to find Nabor Industries’ common stock value. c. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share?

STEP BY STEP

Reference no: EM131186299

Questions Cloud

Make decisions on how to improve menus and profitability : Applebee’s is the largest casual dining chain in the world, with over 1800 locations throughout the U. S. and also in 20 other countries. The menu features beef, chicken, and pork items, as well as burgers, pasta, and seafood. What pieces of data wou..
The firm weighted average cost of capital : The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Be..
Holding period return-money-market yield basis : A. An investor buys $1m face value of a new 91-day US T-Bill at a discount of 6.29%. What is the purchase price? B. The investor sells the bill 31 days later when discount rates have risen to 6.35%. What are the sale proceeds? C. What is the holding ..
Manufactures time series photographic equipment : Flotation Costs and NPV Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .85. It’s considering building a new $58 million manufacturing facility. This new plant is e..
Using the free cash flow valuation model : The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Es..
The standard normal transformation : The standard normal transformation:
What is the bond coupon rate : Sky Enterprises outstanding bonds have a 25 year maturity and a $1000 par value. Their yield to aturity is 9.25%. They pay coupon payments semiannuallym and they are selling at a price of $850. What is the bond's(annual) coupon rate?
Find the present value of an annuity : Find the Present Value of an annuity that pays $1000 per year for 12 years at 10%? How would your answer change if the payments are made at the beginning of the year?
Debt or equity to finance the firm redevelopment investment : During the last few years, many companies have suffered major trading losses because of the poor economic climate. Assume your firm has found itself in this situation and is considering a major redevelopment investment to exploit growth opportunities..

Reviews

Write a Review

Financial Management Questions & Answers

  Risky asset to form a potfolio with expected rate of return

You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky assest with an expected rate of return of 11% and a standard deviation of 20% and a Treasury bill with a rate of return of 3%. How much money should be invested..

  Calculate the price per share required in a new public issue

Earnings have been running at about the same level as dividends - Calculate the price per share required in a new public issue

  Correctly priced if the risk-free rate of return

Which one of the following stocks is correctly priced if the risk-free rate of return is 2.5 percent and the market risk premium is 7.80 percent? Stock Beta Expected Return A 0.73 8.61% B 1.47 13.90% C 1.39 13.34% D 1.04 10.53% E 0.96 9.84%

  Complete business program-including tuition-costs of living

Raul's friend wants to fo to business school. While his father will share some of the expenses, Zach will still needs to put in the rest of his own. But Zach has no money saved for it yet. According to him, it will take him $16,391 to complete the bu..

  The growth of mature companies is primarily funded

The growth of mature companies is primarily funded by: A. issuing new shares of stock B. Issuing new debt securities C. Reinvesting company earnings D. Increasing accounts payable

  Talk about investing

When we talk about investing, the first thing that comes to mind for most people are stocks and bonds. However, there are many investing vehicles available. If you were told, you could only select one investment vehicle, what would it be and why?

  Savings account

John Vincent invested 10,000 in a savings account. The account pays 4.5% annual interest. john will have how much in the account at the end of 10 years? Round to the nearest dollar

  What is the present value of this growing perpetuity

You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $24,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.03 annually. If you use ..

  Formal agreement-investment banks

Before entering a formal agreement, investment banks carefully investigate the companies whose securities they underwrite; this is especially true of the issues of firms going public for the first time.

  The equipment will be depreciated straight line

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years fo..

  Issues zero coupon bonds-yield to call

Atlantis Fisheries issues zero coupon bonds on the market at a price of $447 per bond. These are callable in 6 years at a call price of $520. Using semiannual compounding, what is the yield to call for these bonds?

  Major perceptual errors that tend to occur

As Marie and Harry enter into their negotiations, their perceptions of each other will be an important component to the negotiation process. Define perception and the role it plays in the negotiation process. What are the four major perceptual err..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd