Conundrum Mining is expected to generate the following free cash flows over the next four years, after which they areexpected to grow at a rate of 5% per year. If the weighted average cost of capital is 12% and Conundrum has cash of$80 million, debt of $60 million, and 30 million shares outstanding, what is Conundrum's expected current share price?Round to the nearest cent.Year1234Free Cash Flow $12 million $18 million $22 million $26 millionO A. $13.72B. $16.25C. $16.16D. $10.84E. $17.15

Current share price:The term "current share price" refers to the value at which a particular stock…

Answered: Conundrum Mining is expected to…

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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A firm expects to generate $100 million in free cash flow in a year. This free cash flow is expected to grow at a constant annual rate of 5%. The firm has a 19% cost of capital, $366 million of debt, and 20 million shares of common stock outstanding. Compute the value of the firm. (show your answers in millions - example, $10,000,000 would be entered as 10)
What is the cash cow value and the value of its growth opportunities (NPVGO) if a corporation has current earnings of $5 per share and expects to be able to make an investment of 20% of its earnings next year in a new one-time project with an expected return on invested capital of 24%? The discount rate for the firm is 8%. Cash cow value is $62.50 and NPVGO is $1.85 Cash cow value is $20.83 and NPVGO is $2 Cash cow value is $62.50 and NPVGO is $14 Cash cow value is $25.00 and NPVGO is $3 Cash cow value is $25.00 and NPVGO is $3
Find the profitability index (PI) for the following series of future cash flows, assuming the company’s cost of capital is 13.85 percent. The initial outlay is $328,041. Year 1: $196,585 Year 2: $165,370 Year 3: $148,695 Year 4: $188,689 Year 5: $128,457
17
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
7 Full Boat Manufacturing has projected sales of $123.5 million next year. Costs are expected to be $73.6 million and net investment is expected to be $14.75 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6.4 million shares of stock outstanding and investors require a return of 11 percent return on the company’s stock. The corporate tax rate is 22 percent. What is your estimate of the current stock price? A. 89.39 B. 88.53 C. 93.98 D. 85.33
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?
Young & Liu Inc.'s free cash flow during the just-ended year (t = o) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions? a. $998 O b. $1,050 Oc$1,158 Od. $948 Oe. $1,103
HCB, Inc.free cash flows for next year (FCF1) are expected to be $5 million. Free cash flows are expected to grow at a rate of 6% forever. It also has the following financial information: Market value of HCB Debt = $70 million Short-term investments = $15 million Book value of equity = $60 million Total Assets = $80 million Shares outstanding = 2.5 million Required return on stock = 11% WACC = 9% Calculate HCB's intrinsic value per share. $30.51 $33.56 $36.91 $40.61 $44.67 - the correct answer Do not use Excel!
Normaltown Corporation An analyst has predicted the free cash flows for Normaltown Corporation for the next four years: YEAR 2004 FCF $13 million 2005 $17 million 2006 $23 million 2007 $28 million After 2007, the free cash flows are expected to grow at an annual rate of 4%. The weighted average cost of capital for Normaltown is 14%. If the market value of the firm's debt is $110 million, find the value of the firm's equity. $158.77 million $89.39 million $216.00 million $119.00 million
A venture will provide a net cash inflow of $57,000 in Year 1. The annual cash flows are projected to grow at a rate of 7 percent per year forever. The project requires an initial investment of $739,000 and has a required return of 15.6 percent. The company is somewhat unsure about the growth rate assumption. At what constant rate of growth would the company just break even? O 9.48% O 9.29% O 7.89% O 8.49% A Moving to another question will save this response. «< Question 15 of 30
Intrinsic valuation. Given the following: Free cash flows: year 1: -$15m year 2: $25m year 3: $30m WACC = 10%. After 3 years, cash flows will grow at a constant 4% $15m in marketable securities, $80m in debt, and 1 million in shares calculate: a. the horizon value b. the current value of operations c. the intrinsic value per share (Show all work)

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