What is the total value of the company using the APV model

Assignment Help Financial Management
Reference no: EM131937326

A company has a capital structure of 40% debt at a cost of 690 and the rest in equity. The stock has a beta of 1.5; the risk-free rate is 3%; and the market risk premium 4%. The firm pays a 35% tax rate. The firm estimates that for the next four years, its cash flow plus tax shield will be $4 million with a terminal value of in year five of $28 million What is the total value of the company, using the APV model? 

Reference no: EM131937326

Questions Cloud

How much should you be willing to pay for stock : If you require a 15 percent rate of return, how much should you be willing to pay for this stock?
According to the interest rate parity theory : If the interst rate in Great Britain remains 2.5%, what should the interest rate be in the U.S. according to the interest rate parity theory?
Division will be financed with similar mix of debt-equity : Multi-Foods is financed 50% by debt and 50% by equity which is company target capital structure. Each division will be financed with similar mix of debt-equity.
Choice assuming they both would perform the required tasks : which model would be the best choice assuming they both would perform the required tasks?
What is the total value of the company using the APV model : What is the total value of the company, using the APV model?
Cheaper on per-year basis than leasing machine : Determine if owning the machine would be cheaper on a per-year basis than leasing the machine.
Use either replacement chain or EAA and EAC analysis : You are free to use either replacement chain or EAA/EAC analysis.
Expected value of forward and money market hedges : Calculate the expected value of the forward and the money market hedges and make a recommendation.
Statements regarding loanable funds theory is correct : Which of the following statements regarding loanable funds theory is CORRECT?

Reviews

Write a Review

Financial Management Questions & Answers

  Shares of preferred stock outstanding which pay dividend

XYZ corp. currently has 50 million shares of common stock outstanding. Their current market price is $80 per share and have a beta of 1.15. XYZ has $1 billion of bonds outstanding, each with the market value of $1100. It is known that the yield to ma..

  Main types of bonuses common in executive compensation

Discuss the three main types of bonuses common in executive compensation. Please discuss in detail and provide examples of each type of bonus.

  Will security prices increase and decrease

Will security prices increase, decrease, or stay the same following this announcement?

  What are the total costs–order costs plus carrying costs

Economic Order Quantity. Micro-Encapsulator Corp. (MEC) expects to sell 7,200 miniature home encapsulators this year. The cost of placing an order from its supplier is $250. Each unit costs $50 and carrying costs are 20% of the purchase price. (Pleas..

  What is the after tax salvage value of the old mower

Justin’s Landscaping Service purchased an industrial riding mower two years ago for $21,000. At the time, Justin’s accountants told him to depreciate it using straight line over five years. Now Justin has found that a new and improved mower has just ..

  Incremental investment in an equivalent-sized home

What is the IRR on the incremental investment in an equivalent-sized ICF home?

  Calculate the present value of growth opportunities

Calculate the Present Value of Growth Opportunities [PVGO] based on: Earnings Per Share = $8.00, Required Rate of Return = 14%, Dividends Per Share = $1.50, Return on Equity = 16%. If an investor is willing to pay a P/E multiple that is no higher tha..

  What is the effective rate on entire balance

What is the effective interest rate if loan terms are 30 years, 11%, 0 points, OFV, what is the effective rate on entire balance?

  What is the cost of preferred stock-risk-free rate

The 8.50 percent preferred stock of Ajax Unlimited is selling for $92.30 a share. What is the cost of preferred stock if the risk-free rate is 3.95 percent?

  Build foundation for longstanding financial security

An attempt should be made to take actions that build a foundation for longstanding financial security.

  Relations as function of common variable for alternative

Use an interest rate of 5% per year and the AW relations as function of common variable for each alternative.

  What is equal annual amount that has the same present worth

Maintenance on a test track simulator used to ‘‘exercise’’ vehicles 24/7 for engineering reliability analyses is expected to require $14,000 the first year increasing by 10% each year thereafter during its 5-year life. Interest is 15%. Determine the ..

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