What is the fair price for acme shares

Assignment Help Finance Basics
Reference no: EM133060110

ACME Transmission Inc. is a tier 1 auto parts supplier. Analysts expected ACME to generate free cash flow of $2 billion in one year. Assume that cash flows occur on December 31 and today is January 1. Analysts expect the cash flows to grow at 2.5% in perpetuity. ACME has $9.5238 billion of debt, which is equal to 1/3rd of its value and it is committed to maintaining that ratio in perpetuity. The required return of shareholders is 12.5% and the required return of lenders is 5%. The tax rate is 30%. There are 2 billion shares outstanding. What is the fair price for ACME's shares? Round your answer to the nearest cent.

Reference no: EM133060110

Questions Cloud

What is the primary purpose of accounting : What is the primary purpose of accounting and bookkeeping activities? Explain the difference between a bookkeeper and an accountant
Market required yield to maturity : 1. The value of the bond is? $______ enter your response here. (Round to the nearest? cent.) Calculate the value of a bond that matures in 13 years and has a $1
What is depreciation on the building : The estimates of useful life and residual value were changed to 15 total years and $700,000, respectively. What is depreciation on the building for 2021
Describe country level risk for firms : Describe country level risk for firms operating in India. Include indicators of political and social instability in India.
What is the fair price for acme shares : There are 2 billion shares outstanding. What is the fair price for ACME's shares? Round your answer to the nearest cent.
How much money would you need to have saved : How much money would you need to have saved by the time you are 35 in order to purchase such an annuity if the annuity pays an APR of 3.6%
What is the risk-neutral probability : If people are not risk-neutral and the 1-year spot interest rate is 9%, what is the risk-neutral probability of an "up" move
Determine the weights for different sources of capital : Lexi, Lauren and Madeleine wrapped up their discussion with a view of how to calculate the weighted average cost of capital. Lexi says, "One should always use a
Should recognize a liability for the refunds : By reference to the 2020 Conceptual Framework definition and recognition criteria, should recognize a liability for the refunds in the financial statements

Reviews

Write a Review

Finance Basics Questions & Answers

  What source of capital should be included

During the last few years, Davis Industries has been too constrained by the high cost of capital to make many capital investments.

  Research the pwm technology and write a summary report

Research the PWM technology and write a summary report.- Describe the features and characteristics of multilevel converters and multistep converters.

  Assume annual coupon payments

What is the yield to maturity of a 16-year bond that pays a coupon rate of 10.57 percent per year, has a $1,000 par value, and is currently priced at $1,193.96?

  What is the npv of new investment

What is the NPV of this new investment? Is it a good investment? Hint: you will need to use the growing annuity formula twice.

  Find the direct or indirect cost fall for specific job

Sparky Ltd is a business that employs a number of electricians. The business undertakes a range of work for its customers, from replacing fuses to installing complete wiring systems in new houses.

  Calculate the total amount of money

4. Tia is currently in grade 9 and plans on saving money for college. She plans on depositing $200 each month for the next 4 years into an account which pays an

  What types of financial ratios would you enlist

You have been retained as a consultant for Ecosphere and tasked with assessing the financial viability of their commercial ventures. What types of financial ratios would you enlist in your report to Ecosphere?

  What is the market-to-book ratio

The company has earnings per share of $0.73 and a book value per share of $5.03. What is the market-to-book ratio? Round your answer to the nearest hundredth.

  If the expected return on the market is 16 percent and the

silicon corp. recently issued 10-year 12 percent coupon bonds at par value. silicons beta is 0.6 the optimal capital

  Find the treasury bond that matures

Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013.

  Investment be worth at the end of four years

you are interested in investing $15,000, a gift from your grandparents, for the next four years in a mutual fund that will earn an annual return of 8 percent. What will your investment be worth at the end of four years? (Round to the nearest dolla..

  Instantaneous variance of the stock price

What is the value of a European call option with an exercise price of $40 and a maturity date six months from now if the stock price is $28, the instantaneous

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