What would be the value of each share

Assignment Help Accounting Basics
Reference no: EM133130500

Question - Show Answers with Excel Solutions. Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below.

Year

Cash flow

2018

500,000

2019

550,000

2020

620,000

2021

700,000

2022

800,000

After 2022 it is expecting growth in cash flow at an annual rate of 3%. The firm has determined that its weighted average cost of capital (discount rate) is 7%. Using the table below calculate the following:

1. What is the present value of Acme's future cash flows using the discounted cash flow model?

2. If the firm has 200,000 common shares outstanding, zero preferred shares, and debt with a market value of $10,000,000 what would be the value of each share?

3. Now suppose the discount rate increases to 10%. How would your answers to a) and b) above change based on the new discount rate?

Reference no: EM133130500

Questions Cloud

How many units should be produced in march : Bookworm Corporation maintains ending inventory for each month at 5% of the following month's sales. How many units should be produced in March
May arise during health care project : What are some examples of project risks that may arise during a health care project? How do you reduce risks?
Calculate the mortised cost of the loan stock at February : On March 1, 2022, an entity bought $50,000,000 of 7% loan stock for $47,865,000 after discount. Calculate the mortised cost of the loan stock at February
What appropriate discount rate use for evaluating project : If the project is accepted, the company's weighted average cost of capital will be 10%. What is the appropriate discount rate to use for evaluating the project
What would be the value of each share : If the firm has 200,000 common shares outstanding, zero preferred shares, and debt with a market value of $10,000,000 what would be the value of each share
Market for college education obama decries rising : The Market for College Education Obama Decries Rising Cost of College Education President Obama told colleges, "You can't assume that you'll just jack up tuitio
Determine the minimum number of agents : Develop an ExtendSim model to determine the minimum number of agents that will result in an average waiting time of 5 minutes or less
Presenting opportunities for global expansion : Discuss and interpret how emerging economies are presenting opportunities for global expansion for businesses using examples to illustrate your work.
Achieve meaningful economic progress : How political, economic and legal systems influence a country's ability to achieve meaningful economic progress?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Discuss difference between tax evasion and tax minimization

Discuss the difference between tax evasion and tax minimization. Consider when will the tax office deny a deduction based on a taxpayer's subjective

  Schools of veterinary medicine

If the incomes of veterinarians are falling, why has the number of students enrolling in schools of veterinary medicine in the United States not declined?

  A hospital arranges with a third party payer to charge

A hospital arranges with a third party payer to charge the third party 75 percent of its established billing rates. During January 2012, the hospital provided services amounting to $ 1 million at the established billing rates.

  What are the expected next year earnings for a company

What are the expected next year's earnings for a company that has a stock price today of $34, has a cost of equity of 7.3%, a WACC of 6.5%

  On march 26 sinker industries received a special order

on march 26 sinker industries received a special order request for 120 ten-foot aluminum fishing boats. operating on a

  Determine the robert employer deduction

Robert entertains several of his key clients on January 1 of the current year. Determine the Robert's employer's deduction

  What is an intangible asset should all intangible assets

what is an intangible asset? should all intangible assets be subject to amortization? explain why or why not. why is

  Journalize the adjusting entrees to be made by baumgarder

baumgardner companys bank statement from last national bank at august 31 2010 shows the following information.balance

  If the transaction is with a consolidated affiliate it

if the transaction is with a consolidated affiliate it must be eliminated from the consolidated statements. does it

  Determine gross profit to be reported on income statement

Determine the gross profit to be reported on the income statement for the year ended June 30, 2008

  What will happen to the firm current ratio

The King Carpet Company has $2,870,000 in cash and a total of $12,320,000 in current assets. What will happen to the firm current ratio

  Find the journal entries

Coyle Corp. issued $10,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $70,000. What are the journa..

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