Reference no: EM132618505
Your employer, amid-sized human resources management company, Is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of Bigger-staff & McDonald (B&M), a privately held company owned by two friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&M's financial statements report short-term investments of $100 million, debt of $200 million, and preferred stock of $50 million. B&M's weighted average cost of capital (WACC) is 11%.
a. Describe briefly the legal rights and privileges of common stockholders.
b. What is free cashflow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?
c. Use a pie chart to illustrate the sources that comprise a hypothetical company's total value. Using another pie chart, show the claims on a company's value. How is equity a residual claim?
d. Suppose the free cash flow at Time 1 is expected to grow at a constant rate of gL forever. If gL < WACC, what is a formula for the present value of expected free cash flows when discounted at the WACC? If the most recent free cash flow is expected to grow at a constant rate of gL forever (and gL < WACC), what is a formula for the present value of expected free cash flows when discounted at the WACC?
Attachment:- Weighted Average Cost of Capital.rar
What is the annual operating cash flow
: A 10-year project is expected to generate annual sales of $286,494, variable costs of $49,512, and fixed costs of $30,651.
|
How would this transaction be reported within the cash ?ow
: KAJ Incorporated purchased a machine costing $251,200 by paying $35,400 and signing a $215,800 note payable. How would this transaction be reported
|
Concept of comparable risk
: Explain how the discount rate incorporates the concept of comparable risk?
|
What is the value of the firm jump co
: Jump Co had assets with a book value of $450 million, and an ROIC of 22%. The company's tax rate is 35% and the average annual depreciation
|
What is the weighted average cost of capital
: Describe briefly the legal rights and privileges of common stockholders. What is free cashflow (FCF)? What is the weighted average cost of capital?
|
Calculate the compound rate of reduction in price
: The historic Virginia home that Confederate Gen. Robert E. Lee grew up in hit the market in April 2018 for $8.5 million. (Trapasso, C.)
|
Calculate the incremental cash flows for each year
: Calculate the incremental cash flows for each year.Calculate the net present value, that is, the net benefit or net loss in present value terms of the project.
|
What is the accumulated depreciation balance as of December
: The company will use the double declining balance depreciation method, What is the accumulated depreciation balance as of December 31, 2020
|
Define why patient is presenting with the specific symptoms
: At its core, pathology is the study of disease. Diseases occur for many reasons. But some, such as cystic fibrosis and Parkinson's Disease, occur because.
|