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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 .3, and a tax rate of 30 percent. Assume a risk-free rate of 5 percent and a market risk premium of 11 percent. Lauryn’s Doll Co. had EBIT last year of $50 million, which is net of a depreciation expense of $5 million. In addition, Lauryn made $6.5 million in capital expenditures and increased net working capital by $3.4 million. Assume her FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Omit the "$" sign in your response.)
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 18 million. The cash flows from the project would be sf 5.5 million per year for the next five years. Use the approximate ..
Assume that managers of QVC Hospital are setting the price on a new outpatient service. Here are relevant data estimates: What per visit price must be set for the service to breakeven? To earn an annual profit of $100,000?
The next dividend payment by Blue Cheese, Inc., will be $1.92 per share. The dividends are anticipated to maintain a growth rate of 6 percent forever. The stock currently sells for $38 per share. What is the expected capital gains yield? What is the ..
Are dividends relevant in determining share values? Identify one factor that indicates they are, and one that indicates they are not. Give your opinion on this question and why you hold it. Select one of the following theories and provide an argument..
Consider a 30-year corporate bond paying 8 percent semi-annual coupon. The current yield to maturity is 10 percent. Find the approximate bond’s modified duration by using changes in the interest rate up and down by 5 basis points.
You are involved in the planning process for a firm that is expected to have a large increase in sales for the next year. Which type of firm would benefit the most from that sales increase: a firm with low fixed costs and high variable costs or a ..
We are evaluating a project that costs $1,220,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 88,900 units per year. Price per unit is $35.20,..
Calculate the market price for the bonds and long-run earnings growth rate.
Aviva Technology’s operating cycle is 93 days. Its inventory was $121,240 at the end of last year, and the company had a $1.0 million cost of goods sold. How long does it take Aviva to collect its receivables on average? (Round intermediate calculati..
Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.6 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?
You own 1000 shares of stock in Beal's Corporation. You will receive $.75 per-share dividend in one year. Into years, Beal's will pay a liquidating dividend of $40 per share. The required return on Beal's stock is 16%. Suppose you want only $190 tota..
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,220,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worth..
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