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.Year123FCF (S million) 20 48 54The 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

Current price of stock is the price which can be paid for purchase of the stock. It is also called…

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 ($ 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? $55.25 $27.30 $60.70 $38.55

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 ($ 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? $55.25 $27.30 $60.70 $38.55

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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#6!
Summit Systems will pay a dividend of $1.48 this year. If you expect Summit's dividend to grow by 5.8% per year, what is its price per share if the firm's equity cost of capital is 11.3%? The price per share is $ (Round to the nearest cent.)
Assume an M&M world with taxes. Your company's EBIT is currently $20,000,000, and EBIT is expected to remain constant over time (zero growth). The company pays out all of its earnings each year, so its earnings per share equals its dividends per share. The firm has 6,000,000 shares outstanding. The risk-free rate in the economy is 2.5 percent, and the market risk premium is 5.0 percent. The company's beta is currently 1.50. And, of course, the tax rate is 40%. Currently, the firm as no debt outstanding. The company decided to issue $X million worth of debt, and to use the proceeds to repurchase shares in the open market. When the announcement of the debt issue was made yesterday, the stock price reacted appropriately, increasing by 8%. The firm then issued the debt and repurchased the shares as planned. What is the final beta of the firm's equity? You should use all M&M assumptions for this answer. Answer in X.XX format. For example, a final beta of 1.0356 should be entered as 1.04.
ABC's free cash flow to equity holders (FCFE) during the current year is $130 million, which is expected to grow at a constant rate of 4% in the future. The firm's market cap rate is 10%. What is the firm's total equity value (in $ million)?
XYZ Inc. pays $4 current dividend out of its net income of $9. XYZ Inc. has return on investment of 20%, and a beta of its stock is 1.50. Its dividends are assumed to grow at a constant rate indefinitely. Assume market return of 12% and risk-free rate of 3.90%. (1) What is the retention ratio? (2) Find the growth rate of dividends. (3) Find the require rate of return of its stock. (4) Use the constant growth rate model to find the value of the stock
G Corps’ free cash flow was just FCF0 = $1.32 (Millions) Analysts expect the company's free cash flow to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The WACC for this company 9.00%. D has $4 million in short-term investments and $14 million in debt and 1 million shares outstanding. What is the stock price at year 2? What is the best estimate of the stock's current intrinsic price? If the market price is $33, do you buy or sell?
Company has the following cash flow stream. CF1 = 486 CF2 = 687 CF3 = 840 CF4 = 938 Cash flow is expected to be constant after year 4, with a growth rate of 4%. The WACC is 10%. In addition, company has 32 millions debt, with 51 millions shares outstanding. What is the stock price, P0 , today?
Assume that the average firm in Masters Corporation’s industry is expected to grow at a constant rate of 3% and that its dividend yield is 5%. Masters is about as risky as the average firm in the industry and just paid a dividend (D0) of $2.5. Analysts expect that the growth rate of dividends will be 25% during the first year (g0,1 = 25%) and 10% during the second year (g1,2 = 10%). After Year 2, dividend growth will be constant at 5%. 1. What is the required rate of return on Masters’s stock? 2. What is the estimated intrinsic per share?
M4
Summit Systems will pay a dividend of $1.67 this year. If you expect Summit's dividend to grow by 5.9% per year, what is its price per share if the firm's equity cost of capital is 11.7%? The price per share is $ (Round to the nearest cent.)
Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of 5% and that its dividend yield is 8%. C&J is about as risky as the average firm in the industry and just paid a dividend (D0) of $2.5. Analysts expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 30% during the second year (g1,2 = 30%). After Year 2, dividend growth will be constant at 5%. What is the required rate of return on C&J's stock? What is the estimated intrinsic price per share? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest whole number.
Heinfeldt Inc. forecasts the free cash flows (FCFs) (in millions) shown below. The weighted average cost of capital (WACC) is 12%, and the FCFs are expected to continue growing at a 4% rate after Year 3. The firm has $168.05 million of market - value debt, but it has no preferred stock or any other outstanding claims. There are 50 million shares outstanding. Year 1 2 3 FCF $80 $ 130 $200 a. What is the estimated stock price today ( Year 0)? b. Set up a simple Excel data table where you show how the estimated intrinsic value varies as the long - run growth rate varies over the following range (2.00%, 2.25%, 2.50%, 2.75%, 3.00%, 3.25%, 3.50%, and 4.75%) assuming everything else stays constant.

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