Phoenix Corp, faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are asfollows:(5 millions) 2020 2021 2022 2023Net income1.01.0InvestmentFree cash flow 02.0 3.2 3.711.0 1.2 1.41.0 2.0 2.3Present valuePhoenix's recovery will be complete by 2024, and there will be no further growth in net income or free cash flow (it will remainconstant at $2.6 million after 2024).20244.0a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer inmillions rounded to 2 decimal places.)Price per share1.42.6millionb. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations.Round your answer to 2 decimal places.)

The value of cash available to a corporation after covering the costs of doing business is measured…

a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value million b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations.

a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value million b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations.

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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Suppose that Xtel currently is selling at $46 per share. You buy 250 shares using $8,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 6%. Required: a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Xtel? b. If the maintenance margin is 25%, how low can Xtel's price fall before you get a margin call? c. How would your answer to (b) change if you had financed the initial purchase with only $5,750 of your own money? d. What is the rate of return on your margined position (assuming again that you invest $8,000 of your own money) if Xtel is selling after 1 year at: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Xtel? Assume that Xtel…
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4. Rivoli Inc. hired you as a consultant to help estimate its cost of capital. You have been provided with the following data: D0 = $0.80; P 0 = $25.00; and g = 8.00% ( constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations. a . 9.85% b. 14.32% c. 11.46% d . 9.74% e. 13.17%

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