Assume that today is December 31, 2021, and that the following information applies to Abner Airlines: After-tax operating income (EBIT(1-T)] for 2022 is expected to be $400 million. The depreciation expense for 2022 is expected to be $180 million. The capital expenditures for 2022 are expected to be $200 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 3% per year. The required return on equity is 13%. The WACC is 10%. The firm has $190 million of nonoperating assets. The market value of the company's debt is $4.541 billion. 70 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent. S

Assume that today is December 31, 2021, and that the following information applies to Abner Airlines: After-tax operating income (EBIT(1-T)] for 2022 is expected to be $400 million. The depreciation expense for 2022 is expected to be $180 million. The capital expenditures for 2022 are expected to be $200 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 3% per year. The required return on equity is 13%. The WACC is 10%. The firm has $190 million of nonoperating assets. The market value of the company's debt is $4.541 billion. 70 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent. S

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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Jacob Inc. is considering a capital expansion project. The initial investment of undertaking this project is $188,500. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $28,500, $38,780, $58,960, $77,680 and $95,380 respectively. Jacob has a weighted average cost of capital of 18%. What is the modified internal rate of return if Jacob undertakes this project. Assuming that the positive cash inflow from undertaking this project will be reinvested at the weighted average cost of capital.
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