38. You have forecast the free cash flows to the firm for Permelac Inc., a young and growing company, for the next ten years. You estimate that the cash flows will be negative for the first six years and that you will have to issue 25 million new shares (your estimate) to cover these cash flow needs. You have computed the present value of all of the cash flows, including the terminal value, to be $1.5 billion and you have 100 million shares outstanding today. What is the value per share today? a. $12/share b. $15/share c. $20/share d. $25/share

38. You have forecast the free cash flows to the firm for Permelac Inc., a young and growing company, for the next ten years. You estimate that the cash flows will be negative for the first six years and that you will have to issue 25 million new shares (your estimate) to cover these cash flow needs. You have computed the present value of all of the cash flows, including the terminal value, to be $1.5 billion and you have 100 million shares outstanding today. What is the value per share today? a. $12/share b. $15/share c. $20/share d. $25/share

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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1. GeoTech Company will be holding an IPO of two million shares tomorrow. Market expectations are high for this IPO. The company is expected to pay $1.00 per share starting one year from now. The dividends are then expected to grow at a supernormal rate of 25% for three years, before dropping down to 15% for three more years, and then to 7% afterwards. The 7% growth is then expected to continue for the foreseeable future. What is the gross dollar amount that will be raised from this IPO if the required return for similar issues is 16%? Hint: The first dividend is $1.00.
The analyst estimates that after three years the National Inc’s free cash flow will grow at a constant rate of 6% per year. The analyst estimates that the company’s WACC is 10%. The total market value of debt and preferred stock is P25,000 and there are 1,000 outstanding shares of common stock. What is the intrinsic value of the company’s common stock? a. P99.50 b. P84.34 c. P75.31 d. P112.22
am. 123.
STARS Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it expects a growth rate of 20% for the next two years. After Year 3, FCF is expected to grow at a constant rate of 6% forever. The Weighted Average Cost of Capital (WACC) is 10.00%, and the company has $85,000,000 of long-term debt (the remainder is comprised of common equity) and 12.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock? (Ch. 9) Group of answer choices 27.75 21.22 19.29 24.12 26.38
Tin Roof's net cash flows for the next three years are projected at $72,000, $78,000, and $84,000, respectively. After that the cash flows are expected to increase by 2.5 percent annually. Recently issued debt carries an interest rate of 7.85%. Tin Roof's marginal tax rate is 21%. The cost of equity is 11.4 percent. a) What is the value of the firm if it is financed with 40 percent debt and 60 percent equity? b) Tin Roof has 20,300 outstanding shares and are currently trading for $29.00 per share. At this price do you believe that Tin Roof shares are over priced, under priced or fairly priced. Please justify your answer. Please show excel formulas, Thank you
Kosm Inc. forecasts a positive Free Cash Flow for the coming year, with FCF1 = $10,000,000, and it expects a growth rate of 30% for the next two years. After Year 3, FCF is expected to grow at a constant rate of 4% forever. The Weighted Average Cost of Capital (WACC) is 11%, and the company has $65,000,000 of long-term debt (the remainder is comprised of common equity) and 10.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?
A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.75 percent for the next five years. After that, you expect the company to grow 3.75 percent in perpetuity. The company has a 14 percent ROE and you expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.
ACME, Inc. forecasts that it will have the free cash flows shown below. The free cash flows are expected to grow by 4% per year after year 3. Year 1 23 FCF (S million) 20 48 54 The weighted average cost of capital is 11%. The firm has $40 million of debt and 10 million shares outstanding. What is a good estimate of ACME's share price? O $55.25 $27.30 $60.70 $38.55
The following table shows projected free cash flows for the next four years for Quick Sky Corp., a company producing wind turbines. Year 2 2 3 Free Cash Flow (Millions of dollars) 3.10 3.41 3.75 4.13 After the four year period, Quick Sky is expected to grow at a constant rate of 10% and its WACC is 15%. Quick Sky has $25 million of debt and $180 million shares of stock outstanding. Quick Sky's value today is million and the price per share today is
Suppose today is January 1, 2022. You wish to value the shares of Terrapin Industries, a private firm with 100 million outstanding shares, $300M in debt, and $25M in excess cash. The company has a tax rate of 30%. You expect the company’s Sales to equal $300 million in 2022, and to grow at 10% per year through 2025. The company’s EBIT margin (i.e., EBIT as a % of sales) is expected to be 10%, while Net Working Capital is expected to equal 20% of (same year) sales. The balance sheet amount of Net Working Capital at the end of 2021 was $55 million. You expect that the company’s Net PP&E will remain constant from now through 2025 (i.e., capital expenditures will equal depreciation each year). After 2025, free cash flows are projected to grow at a constant 2% rate forever. You expect Terrapin to maintain a 50% D/V ratio in the future. Given this, you have estimated the beta of Terrapin’s equity (Be) at 1.1 and the beta of its debt (Bd) at 0.3. The current long-term risk-free rate is…

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