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Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 37% of the company's present value, and you believe that at this capital structure the company's debt holders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next year's operating cash flow (depreciation plus profit after tax at 21%) will be $75 million and that investment in plant and net working capital will be $37 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year.
a. What is the total value of Icarus?
b. What is the value of the company's equity?
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As part of the new strategic plan, draft a policy statement, each of 100-200 words which each division's CEO will be asked to disseminate. It must comply with the following policy-writing guidelines:
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Springfield Nuclear Energy Inc. bonds are currently trading at $1,105.38. The bonds have a face value of $1,000, a coupon rate of 9.5% with coupons paid annually, and they mature in 15 years. What is the yeild to maturity of the bonds?
Suppose A has $5M in marketable securities, $200M in liabilities, and 20M shares of stock. What is A's share price?
What is the rationale for offering stock options as compensations? - Why has this form of compensation been particularly popular with technology firms in the past?
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