What is the value of its operations

Assignment Help Finance Basics

Reference no: EM13790187

1. Suppose Leonard, Nixon, & Shull Corporation's projected free cash flow for next year is $100,000, and FCF is expected to grow at a constant rate of 6%. If the company's weighted average cost of capital is 11%, what is the value of its operations?

a. $1,714,750
b. $1,805,000
c. $1,900,000
d. $2,000,000
e. $2,100,000

2. Leak Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and beyond (and do not make any half-year adjustments).

Year: 1 2

Free cash flow: -$50 $100

a. $1,456
b. $1,529
c. $1,606
d. $1,686
e. $1,770

3. Based on the corporate valuation model, the value of a company's operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $300 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of the stock's price per share?

a. $24.90
b. $27.67
c. $30.43
d. $33.48
e. $36.82

4. Based on the corporate valuation model, the value of a company's operations is $900 million. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share?

a. $23.00
b. $25.56
c. $28.40
d. $31.24
e. $34.36

5. Vasudevan Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 13% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions?

Year: 1 2 3

Free cash flow: -$20 $42 $45

a. $586
b. $617
c. $648
d. $680
e. $714

Reference no: EM13790187

Questions Cloud

Describe the key functions that joint commission provides : Conduct some independent research, and in a 2 page Word document, describe the key functions that The Joint Commission provides to healthcare organizations as well as its purpose to the medical community in general

Significant challenges associated with facial reconstruction : What do you think are the most significant challenges associated with facial reconstruction? Explain.

How does program influence decision to purchase : From the perspective of the consumer, how were the paybacks structured and how might they be restructured to entice you at an equal or lower cost of insurance. How does the program influence your decision to purchase,

Is profiling a viable tool why or why not : How would the government use psychological profiling in homeland security? Is profiling a viable tool? Why or why not

What is the value of its operations : Suppose Leonard, Nixon, & Shull Corporation's projected free cash flow for next year is $100,000, and FCF is expected to grow at a constant rate of 6%. If the company's weighted average cost of capital is 11%, what is the value of its operations?

How a company influences their ethical environment : How a company influences their ethical environment

Write a biography for birthplace and birth date : Write a biography for Birthplace and Birth Date, Parents and/or Family, Life History, Inventions and Discoveries and Impact on Current Society and Lifestyles.

Comparing a domestic organized criminal with terrorism group : Create a 4- to 5-slide Microsoft PowerPoint presentation with speaker's notes, comparing a domestic organized criminal group with a terrorist group

User Account

All Pages