3Galaxy Air, previously a no-growth firm, has two million shares outstanding. Until now, it consistently earned $30 million per year on its assets. (It has nodebt and pays out all earnings as dividends. Its cost of capital is 10 percent.) Due to its newly appointed CEO, Galaxy Air is now able to squeeze out 1percent annual growth by plowing back 5 percent of earnings. Calculate its stock price per share.51/222OMultiple Choice$159.92$160.10$150.00$300.00

The current market value of a single share of stock in a publicly listed firm is known as the stock…

Answered: 3 Galaxy Air, previously a no-growth…

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 19 Use the corporate valuation model to find the intrinsic value of a firm with a long-run growth in FCF of 5.75% and a WACC of 8.12%. The firm has $45 million in debt and preferred stock and has 4.5 million shares of common stock. The FCF for the first 4 years are (in millions of dollars): -$15, $12, $14, $19. OA. $63.90 B. $84.60 OC. $132.61 OD. $154.33
#16
3 A7X Corporation just paid a dividend of $1.40 per share. The dividends are expected to grow at 35 percent for the next 9 years and then level off to a growth rate of 8 percent indefinitely. If the required return is 12 percent, what is the price of the stock today? E Multiple Choice $203.02 $238.93 $243.71 R 5 T
MC Qu. 8-A6 The Bell Weather Co. is a new firm in a rapidly growing in... The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 20 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $3.40 per share. What is the current value of one share of this stock if the required rate of return is 8.90 percent?
6 Please show work in Excel format, thanks!
I need part b c and d
2. Problem 10.04 (Cost of Equity with and without Flotation) еВook Problem Walk-Through Jarett & Sons' common stock currently trades at $24.00 a share. It is expected to pay an annual dividend of $2.50 a share at the end of the year (D1 = $2.50), and the constant growth rate is 3% a year. a. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the company issued new stock, it would incur an 8% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.
VanMannen Foundations, Inc. (VF)VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below. EBIT = $80,000 Growth = 0% Orig cost of equity, rs = 10.0% No. of shares = 10,000 Price per share = $60.00 Tax rate = 25% Refer to the data for VanMannen Foundations, Inc. (VF). Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out, what would be VF's new WACC and its new value of operations? New interest rate = rd = 6.00% New cost of equity = rs = 10.75% New Debt/Value = wd = 20% New Equity/Value = ws = 80% Whic one is correct? WACC Value a. 10.10%…
pm.2
2. Conspicuous Consumption Ine, a prominent consumer products firm is debating Whether or not to convert its all-equity capital structure to one that is 35 percent debt. Currently. there are 8,000 shares outstanding and the prise per share is $70. EBIT is expected to remain at $30,000 per year forever, the interest rate on new debt is 8 percent and there are no taxes. A. Ms. Brown,a shareholder of the firm .owns 100shares of stock .what is her cashi flow under the current capital structure, assuming the firm has a dividend payout rate of 100 percent? B. What will Ms. Brown's cash flow be under the proposed capital structure of the firm? Assume that she keeps all 100 of her shares. C. Suppose the company does convert, but MS Brown prefers the current all-equity capital structure. Show how she could unlever her shares of stock to Recreate the original capital structure. D. Using your answer to part (C) explain why the company's choice of capital Structure is irrelevant.

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