3. Corporate valuation model Purple Panda Pharmaceuticals Inc.'s free cash flows (FCFS) are expected to grow at a constant long-term growth rate (gl.) of 13% per year into the future. Next year, the company expects to generate a free cash flow of $10,000,000. The market value of Purple Panda's outstanding debt and preferred stock is $75,000,000 and $41,666,667, respectively. Purple Panda has 4,500,000 shares of common stock outstanding, and its weighted average cost of capital (WACC) is 19%. Given the preceding information, complete the adjacent table (rounding each value to the nearest whole dollar), and assuming that the firm has not had any nonoperating assets in its balance sheet. Term Value of Operations Value of Firm's Common Equity Value of Common Stock (per share) Value $166,666,667 $50,000,000 $11 Oops, a more careful review of Purple Panda's balance sheet actually reports a $2,480,000 portfolio of marketable securities. How does this new information affect the intrinsic value of Purple Panda's common equity (expressed on a per-share basis) assuming no other changes to the Purple Panda financial situation? Review the statements below and select those that accurately describe Purple Panda's financial situation. Check all that apply. The revised intrinsic value of Purple Panda's common stock is $11.66 per share. The intrinsic value of Purple Panda's common stock decreases with the inclusion of the company's marketable securities portfolio into the analysis. The intrinsic value of the company's common stock isn't affected by the new information. The intrinsic value of Purple Panda's common stock increases with the inclusion of the company's marketable securities portfolio into the analysis.
3. Corporate valuation model Purple Panda Pharmaceuticals Inc.'s free cash flows (FCFS) are expected to grow at a constant long-term growth rate (gl.) of 13% per year into the future. Next year, the company expects to generate a free cash flow of $10,000,000. The market value of Purple Panda's outstanding debt and preferred stock is $75,000,000 and $41,666,667, respectively. Purple Panda has 4,500,000 shares of common stock outstanding, and its weighted average cost of capital (WACC) is 19%. Given the preceding information, complete the adjacent table (rounding each value to the nearest whole dollar), and assuming that the firm has not had any nonoperating assets in its balance sheet. Term Value of Operations Value of Firm's Common Equity Value of Common Stock (per share) Value $166,666,667 $50,000,000 $11 Oops, a more careful review of Purple Panda's balance sheet actually reports a $2,480,000 portfolio of marketable securities. How does this new information affect the intrinsic value of Purple Panda's common equity (expressed on a per-share basis) assuming no other changes to the Purple Panda financial situation? Review the statements below and select those that accurately describe Purple Panda's financial situation. Check all that apply. The revised intrinsic value of Purple Panda's common stock is $11.66 per share. The intrinsic value of Purple Panda's common stock decreases with the inclusion of the company's marketable securities portfolio into the analysis. The intrinsic value of the company's common stock isn't affected by the new information. The intrinsic value of Purple Panda's common stock increases with the inclusion of the company's marketable securities portfolio into the analysis.
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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A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Question
51.
Subject : - Finance
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Transcribed Image Text:3. Corporate valuation model
Purple Panda Pharmaceuticals Inc.'s free cash flows (FCFS) are expected to grow at a constant long-term growth rate (gl.) of 13% per year into the
future. Next year, the company expects to generate a free cash flow of $10,000,000. The market value of Purple Panda's outstanding debt and
preferred stock is $75,000,000 and $41,666,667, respectively. Purple Panda has 4,500,000 shares of common stock outstanding, and its weighted
average cost of capital (WACC) is 19%.
Given the preceding information, complete the adjacent table (rounding each value to the nearest whole dollar), and assuming that the firm has not
had any nonoperating assets in its balance sheet.
Term
Value of Operations
Value of Firm's Common Equity
Value of Common Stock (per share)
Value
$166,666,667
$50,000,000
$11
Oops, a more careful review of Purple Panda's balance sheet actually reports a $2,480,000 portfolio of marketable securities. How does this new
information affect the intrinsic value of Purple Panda's common equity (expressed on a per-share basis) assuming no other changes to the Purple
Panda financial situation? Review the statements below and select those that accurately describe Purple Panda's financial situation. Check all that
apply.
The revised intrinsic value of Purple Panda's common stock is $11.66 per share.
The intrinsic value of Purple Panda's common stock decreases with the inclusion of the company's marketable securities portfolio into the
analysis.
The intrinsic value of the company's common stock isn't affected by the new information.
The intrinsic value of Purple Panda's common stock increases with the inclusion of the company's marketable securities portfolio into the
analysis.
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