What is the value of firm

Assignment Help Financial Management
Reference no: EM131570021

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of .7, and a tax rate of 30 percent. Assume a risk-free rate of 6 percent and a market risk premium of 9 percent. Lauryn’s Doll Co. had EBIT last year of $54 million, which is net of a depreciation expense of $5.4 million. In addition, Lauryn made $6.75 million in capital expenditures and increased net working capital by $2.9 million. Assume her FCF is expected to grow at a rate of 3 percent into perpetuity.

What is the value of the firm?

Reference no: EM131570021

Questions Cloud

Calculating rates of return : What rate of return did you earn on your investment in Placo's stock?
Customized unit and system tested application software : Customized unit and system tested application software. Acceptance testing. The central goal of user acceptance testing is to exhibit that the system works.
Discuss the properties of the bipartite graph : Let g be a bipartite graph with bipartition sets VI, V2 and assume that g has a perfect matching. Add two vertices x and y to G such that x is adjacent.
How many messengers can he employ : The diagram represents a system of roads from A to B. The mayor of town A wishes to send a message to the mayor of town B.
What is the value of firm : You are going to value Lauryn’s Doll Co. using the FCF model. What is the value of the firm?
Aspect of human resource management or work : This assignment challenges you to study what faith and scripture say about some aspect of Human resource management or work.
Identify at least three hardware and software tools : Identify at least three hardware and software tools that you would include in the design of the lab and explain your reasons behind your choices.
Advantages and disadvantages of each methodology : What are the advantages and disadvantages of each methodology? What criteria would you use to choose one particular methodology over another for a particular.
Variable market value of equity divided by total liabilities : The variable Market Value of Equity divided by Total Liabilities in the Altman Z-Score measures the current level of ________.

Reviews

Write a Review

Financial Management Questions & Answers

  With an annual compound interest rate

Jason has been making equal annual payments of $7,500 to repay a college loan. He has just made an annual payment and now wants to pay off the rest of the loan immediately. He has eight payments remaining. With an annual compound interest rate of 6 p..

  Calculate the present value of your payments to the bank

A local bank advertises the following deal: Pay us $100 at the end of each year for 12 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever. Calculate the present value of your payments to the bank if the intere..

  What is its pretax cost of debt-cost of equity

Blue Bull, Inc., has a target debt-equity ratio of .73. Its WACC is 8.7 percent, and the tax rate is 38 percent. If the company’s cost of equity is 11.3 percent, what is its pretax cost of debt?

  Certain convertible bond carries a par value

A certain convertible bond carries a par value of $1,000 and a conversion ratio of 25. If the issue is quoted at 148 while the stock trades at $56, the bond's conversion premium equals a. $93.50. b. $80.00. c. $90.00. d. $65.50.

  How are issuances of debt securities and issuances

How are payments to investors in debt securities (interest) and payments to investors in equity securities (dividends) classified in a statement of cash flows? Is this a conceptual inconsistency? Explain.

  What is the required rate of return on preferred stock

What is the required rate of return on a preferred stock with a $50 par value, a stated dividend of 10% of par, and a current market price of (a) $51, (b) $83, (c) $119, and (d) $148 (assume the market is in equilibrium with the required return equal..

  What is the present value of your windfall

Suppose you are committed to owning a $160,000 Ferrari. If you believe your mutual fund can achieve a 10.25 percent annual rate of return, and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?  What is the pr..

  Royalty payments

Former President Bill Clinton reportedly was paid an advance of 15.0 million to write his book "My Life." The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. What is the NPV of agreeing to ..

  What is the most you would pay for this bond

What is the most you would pay for this bond

  Deposit single sum of money in savings account

Troy Long wishes to deposit a single sum of money in a savings account so that five equal annual withdrawals of $2,000 can be made before depleting the fund. If the first withdrawal is to occur 1 year after the deposit and the fund pays interest at a..

  Binomial option pricing model to find value of call option

Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. Th..

  Explain the liquidity preference theory

Explain the liquidity preference theory. Why does the market price of bonds fluctuate inversely with market interest rates?

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