. Valuing a business (S4.6) Phoenix Corp. faltered during the Covid pandemic but is recovering. Free cash flow has grown rapidly. Forecasts made in 2021 are as follows: ($ millions) Net income Investment Free cash flow 2022 1.0 1.0 0 2023 2.0 1.0 1.0 2024 3.2 1.2 2.0 2025 3.7 1.4 2.3 Phoenix's recovery will be complete by 2026, and there will be no further growth in net income or free cash flow. a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? 2026 4.0 1.4 2.6

. Valuing a business (S4.6) Phoenix Corp. faltered during the Covid pandemic but is recovering. Free cash flow has grown rapidly. Forecasts made in 2021 are as follows: ($ millions) Net income Investment Free cash flow 2022 1.0 1.0 0 2023 2.0 1.0 1.0 2024 3.2 1.2 2.0 2025 3.7 1.4 2.3 Phoenix's recovery will be complete by 2026, and there will be no further growth in net income or free cash flow. a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? 2026 4.0 1.4 2.6

Name: 29. Valuing a business (S4.6) Phoenix Corp. faltered during the Covid
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Description: 29. Valuing a business (S4.6) Phoenix Corp. faltered during the Covid pandemic but is recovering. Free cash flow has grownrapidly. Forecasts made in 2021 are as follows:($ millions)Net incomeInvestmentFree cash flow20221.01.0020232.01.01.020243.21.2

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Use the below information to value a levered company with annual perpetual cash flows fror that grow. The next cash flow will be generated in one year from now. Data on a Levered Firm with Perpetual Cash Flows Item Value Item full name abbreviation OFCF (millions) Operating free cash flow $5 3% pa 2% pa 8.6% pa 40% pa 30% Growth rate of OFCF TEL E/V to Cost of debt Cost of levered equity Equity to assets ratio, where the asset value includes tax shi Corporate tax rate The current value of levered equity is O a. 81.94 O b. 113.94 O c. 31.35 O d. 156.25 O e. 234.38
Ledesma Corp. developed a product that will provide zero cash flow at the end of Years 1 and 2, and a cash inflow of $250,000 per year forever, beginning at the end of Year 3. At a discount rate of 18%, what is the present value of the product? $1,288,889 $4845,321 $ 543,568 ion $997, 478 $1.177.024
The following is a four-year forecast for Torino Marine. Year Free cash flow ($ millions) 2022 -63 a. Fair market value b. Fair market value per share 2023 84 2024 101 a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine's weighted-average cost of capital is 9 percent and its tax rate is 20 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. million 2025 123 b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 48 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $380 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
La Falaise Rouge Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars). Calculate the unlevered net income for Year 2. Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in networking capital Capital expenditures Marginal corporate tax rate Year 1 108 -36.6 -24.2 5.1 32.1 43% Year 2 156 -36.6 -38.6 8.9 42.5 43%
Nugent Communication Corp. is investing $8,501,547 in new technologies. The company expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years. Year 1 2 3 4-7 Cash Flows $1,736,907 $4,841,362 $2,794,697 $1,009,125 What is the discounted payback period for the project assuming a discount rate of 10 percent?
As a financial analyst, you have been tasked with evaluating Randy Watson Music's free cash flow. Based on the 2022 income statement, EBIT was $41 million, the tax rate was 21 percent, and its depreciation expense was $6 million. NOPAT gross fixed assets increased by $28 million from 2021 and 2022. The company's current assets increased by $18 million and current liabilities increased by $14 million. Calculate the operating cash flow (OCF) for 2022. (Enter your answer in millions of dollars.)
The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements. Assume that Smith Company determined that it has a 40% probability of receiving $10,000 one year from now and a 60% probability of receiving $10,000 two years from now. (Click here to access the PV and FV tables to use with this problem.) Required: Using the FASB concepts, calculate the present value of the expected cash flows assuming a 12% interest rate compounded annually. Round your answer to two decimal places. $
Kale Inc. forecasts the free cash flows (in millions) shown below. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, then what is the firm’s total corporate value (in millions)? Do not round intermediate calculations. Year 1 2 Free Cash flow -$30 $195 a. $3,413 million b. $2,901 million c. $3,044 million d. $2,743 million e. $2,643 million
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Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.95 $37.9 $43 $51.2 $55.2 The weighted average cost of capital is 12%, and the FCFs are expected to continue growing at a 4% rate after Year 5. The firm has $26 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 18 million shares outstanding. What is the value of the stock price today (Year 0)? Round your answer to the nearest cent. Do not round intermediate calculations.$ per share According to the valuation models developed in this chapter, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock. The statement above is -Select-truefalseCorrect 2 of Item 2.
Google Calendar Use the following table and information to answer questions 26 and 27 The following table presents forecasted financial and other information for XTD Corporation. The table shows end of year numbers (in millions). XTD's WACC is 8%. Year 1 Year 2 Year 3 Net income $65 $72 $80 Free cash flow $40 $45 $50 26) What is an appropriate estimate of XTD's terminal value as of today, using warranted price-to-earnings of 12.0 at year 3? $ 1,036.8 million $ 895.2 million $ 762.1 million O $ 888.8 million
You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $1.15 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $300 million of net PP&E. b. The company currently has $100 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 28 percent. d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $

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