10 Current Assets Current Liabilities Net WC Net Income Depreciation Interest Xp Change NWC Capex Free Cash Flow FOMO company is looking to buy YOLO and used DCF valuation to value YO The industry forward EV/Earnings ratio is 20X. YOLO has $4000 in debt, 200 shares, and is growing at 20%. What is YOLO's value per share given the information below? WACC Year 0 0 0 0 Chg NwC Year 0 7% 1 7,000 5,000 2,000 1 1200 1000 300 200 2300 2 6,000 7,000 (1,000) 2 1500 900 300 200 2500 3 10,000 10,000 3 1800 900 300 200 2800

10 Current Assets Current Liabilities Net WC Net Income Depreciation Interest Xp Change NWC Capex Free Cash Flow FOMO company is looking to buy YOLO and used DCF valuation to value YO The industry forward EV/Earnings ratio is 20X. YOLO has $4000 in debt, 200 shares, and is growing at 20%. What is YOLO's value per share given the information below? WACC Year 0 0 0 0 Chg NwC Year 0 7% 1 7,000 5,000 2,000 1 1200 1000 300 200 2300 2 6,000 7,000 (1,000) 2 1500 900 300 200 2500 3 10,000 10,000 3 1800 900 300 200 2800

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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QUESTION 2 Pipe Ltd is a totally equity-financed company with a value of R200 000,00. Management wants to introduce a 30% debt in the capital structure without altering the total amount of financing required (R200 000,00). Pipe Ltd’s shares are trading at R10,00 per share and the company pays all its earnings as dividends. The details of the new 30% debt ratio are listed below: Debt ratio 30% EBIT R100 000 Interest rate 11.5% Required return 14% Tax rate 28% Calculate the number of shares that can be issued irrespectively under the current and proposed capital structures.
Debt Ratio Equity Ratio EPS DPS Stock Price 30% 70% 1.55 0.34 22.35 40% 60% 1.67 0.45 24.56 50% 50% 1.72 0.51 25.78 60% 40% 1.78 0.57 27.75 70% 30% 1.84 0.62 26.42 Which capital structure shown in the preceding table is Universal Exports Inc.’s optimal capital structure? Globex Corp. has a capital structure that consists of 40% debt and 60% equity. The firm’s current beta is 1.10, but management wants to understand Globex Corp.’s market risk without the effect of leverage. If Globex Corp. has a 25% tax rate, what is its unlevered beta?
YZ Goods target capital structure and other data follow: Long-term debt $ 754,000,000 Preferred stock 40,000,000 Common equity 896,000,000 Total capital $1,690,000,000 Cost of Debt (kd) = 11% for amounts up to 80 M of additional Debt; will rise to 13% after that. Cost of Preferred = 10.5% at any amount T = 40%. P0 = $23. g= 8%, and it is expected to remain constant. Assume that the company expects to have total earnings of $137.8 million in 2020. Further, it has a target payout ratio of 45 percent, so it plans to pay out 45 percent of its earnings as dividends. Flotation cost of 5% is incurred for issuance of new shares. The following projects are available for investment: Project Cost (in Millions) Rate of Return A $50…
Solution for d, e, and f
Profit margin Capital intensity ratio Debt-equity ratio Net income Dividends 8.8% 49 64 -$99,000 $46,000 Based on the above information, calculate the sustainable growth rate for Northern Lights Co. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.32.16) Sustainable growth a
Capital Structure Analysis The Rivoli Company has no debt outstanding, and its financial position is given by the following data: $ 45 6 ✔ Expected EBIT Growth rate in EBIT, gL Cost of equity, rs Shares outstanding, no Tax rate, T (federal-plus-state) a. What is Rivoli's intrinsic value of operations (i.e., its unlevered value)? Round your answer to the nearest dollar. 4500000✔✔ $ What is its intrinsic stock price? Its earnings per share? Round your answers to the nearest cent. Intrinsic stock price: $ Earnings per share: $ 4.50 b. Rivoli is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 35% debt based on market values, its cost of equity, rs, will increase to 12% to reflect the increased risk. Bonds can be sold at a cost, rd, of 8%. Based on the new capital structure, what is the new weighted average cost of capital? Round your answer to three decimal places. 9.9 % What is the levered value of the firm? What is the…
Q.The ASF Company was recently formed to manufacture a new product it has the following capital structure in market value terms Long term liabilities =6 Preferred stock =3 Common stock =8 Total =17 The company marginal tax rate of 40 % with interest expense per month 1. Dividend rate on preferred is 9% with per value of 1000 flotation cost is 10% on per value , dividend rate on common stock is 15% with per value of 10 Market value of share is 1 5 with growth rate 10% . Required Compute the firm present weighted average cost of capital?
Year Revenue Fixed costs Variable costs 0 1 1000.00 150.00 200.00 Add. investment in NWC 10.00 Add. investment in operating long-term 70.00 assets Depreciation 60.00 Interest expenses 35.00 Newly issued debt 25.00 Principle repayments 15.00 Market value of the firm: Short-term debt Long-term debt Price per share No. of shares Market value 200.00 600.00 18.00 100 1,800.00 2,600.00 Common stock Total Cost of equity (Rs) Tax rate 0.1400 0.40 Growth rate per year from year 1 through 0.12 year 5 Growth rate after year 5 0.05 Based on the above information, what is the stock price per share based on the equity free cash flow model? Select one: O a. 36.46 O b. 40.33 O c. 44.47 O d. 32.53
QUESTION 2 Pipe Ltd is a totally equity-financed company with a value of R200 000,00. Management wants to introduce a 30% debt in the capital structure without altering the total amount of financing required (R200 000,00). Pipe Ltd’s shares are trading at R10,00 per share and the company pays all its earnings as dividends. The details of the new 30% debt ratio are listed below: Debt ratio 30% EBIT R100 000 Interest rate 11.5% Required return 14% Tax rate 28% Based on earnings per share, advise management whether they must introduce the 30% debt or retain the totally equity financed capital structure.

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