3. McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds $325,000 of non-operating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding. Calculate the following: a. McCaffrey's value of operations b. The company's total value c. The estimated value of common equity
3. McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds $325,000 of non-operating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding. Calculate the following: a. McCaffrey's value of operations b. The company's total value c. The estimated value of common equity
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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Transcribed Image Text:3. McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known.
Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The
weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds $325,000 of non-operating
marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock.
McCaffrey's has 50,000 shares of stock outstanding.
Calculate the following:
a. McCaffrey's value of operations
b. The company's total value
c. The estimated value of common equity
d. The estimated per-share stock price
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