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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 36% of the company’s present value, and you believe that at this capital structure the company’s debt holders will demand a return of 6% and stockholders will require 13%. The company is forecasting that next year’s operating cash flow (depreciation plus profit after tax at 40%) will be $74 million and that investment expenditures will be $36 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? (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole dollar amount.) b. What is the value of the company’s equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)
A $2,500 6.5% eight-year bond has annual coupons. If it is purchased for $2,590, the investor will anticipate a 5.4% annual yield for the eight-year investment. Find the redemption amount on this bond.
Imagine what the financial world would like look in both the U.S. and in the world if the Federal Reserve did not exist. Provide support for your rationale.
You purchased a commercial building and lot for $340,000 on May 4th, 2014. The lot itself was valued at $85,000 when purchased. You sold the lot and building for $400,000 on March 15th of 2015. Use MACRS depreciation and note that this property is co..
A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. What is the yield to call on this bond?
Annuities. A famous quarterback just signed a $15 million contract providing $3 million a year for 5 years. A less famous receiver signed a $14 million 5 years contract providing $4 million now and $2 million a year for 5 years. The interest rate is ..
These are the forecasts of revenues over the lifetime of a project. Assume all cash flows occur at the end of the year. Yearly expenses from year 1 to year 3: $30 Million Yearly revenues from year 1 to year 3: $0 Yearly expenses from year 4 to year 1..
Klingon Empire Pharmaceuticals is expecting a growth rate of 14% for the next two years due to its new flu preventive drug, Katterracsin. Thereafter it should level to an 8% growth rate. The last dividend paid was $.65 per share. What price should th..
The return on the risky portfolio is 15%. The risk-free rate as well as the investor's borrowing rate is 10%. The standard deviation of return on the risky portfolio is 20%. If the standard deviation on the complete portfolio is 25%, the expected ret..
Consider an annual coupon bond with a face value of $100, 12 years to maturity, and a price of $95. The coupon rate on the bond is 4%. If you can reinvest coupons at rate of 2% per annum, then how much money do you have if you hold the bond to maturi..
study the revenue source information contained in the report. present in a bar graph a comparison of the selected
The Aqua Liquid Assets Money Market Mutual Fund has a NAV of $1 per share. During the year, the assets held by this fund appreciated by 1.1 percent. If you had invested $15,000 in this fund at the start of the year, how many shares would you own at t..
Shalit Corporation's 2011 sales were $6 million. Its 2006 sales were $3 million. At what rate have sales been growing?
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