Derry Corporation is expected to have an EBIT of $3,150,000next year. Depreciation, the increase in net working capital,and capital spending are expected to be $250,000,$155,000, and $255,000, respectively. All are expected togrow at 16 percent per year for four years. The companycurrently has $20,000,000 in debt and 865,000 sharesoutstanding. After Year 5, the adjusted cash flow from assetsis expected to grow at 3.5 percent, indefinitely. Thecompany's WACC is 8.6 percent and the tax rate is 24percent. What is the price per share of the company's stock?Note: Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.Share price

With terminal free cash flow (FCF), WACC and growth rate (g), the terminal value is calculated as…

Answered: Derry Corporation is expected to have…

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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Ohio Quarry Inc. has $20 million in assets. Its expected operating income (EBIT) is $4 million and its income tax rate is 40 percent. If Ohio Quarry finances 20 percent of its total assets with debt capital, the pretax cost of funds is 10 percent. If the company finances 40 percent of its total assets with debt capital, the pretax cost of funds is 15 percent. Round your answers to the questions below to two decimal places. Determine the rate of return on equity (ROE) under the three different capital structures (0, 20, and 40% debt ratios).0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest expected ROE? yields the highest expected ROE. Determine the ROE under each of the three capital structures (0, 20, and 40% debt ratios) if expected EBIT decreases by 40 percent.0% debt ratio: % 20% debt ratio: % 40% debt ratio: % Which capital structure yields the highest ROE calculated in part c? yields the highest expected ROE.…
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?
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!
A company is projected to generate revenues of $336 million and $406 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 35.4%. Forecasted tax rate: 22.2%. Forecasted reinvestment rate: 30%. Forecasted steady growth rate of free cash flow: 1.3% per year. Cost of capital: 13.2%. Debt: $40 million. Cash: $35 million. Shares outstanding: 12 million.
i need the answer quickly
Derry Corporation is expected to have an EBIT of $3,400,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $155,000, and $195,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $17,500,000 in debt and 1,350,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company's WACC is 9.1 percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
Derry Corporation is expected to have an EBIT of $21 million next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $165,000, $80,000, and $120,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $10.4 million in debt and 750,000 shares outstanding. You believe that in Year 5 sales will be $23.7 million and the appropriate price-sales ratio is 2.9. The company's WACC is 8.5 percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
Pearl Corp. is expected to have an EBIT of $2,000,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $85,000, and $125,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $10,500,000 in debt and 850,000 shares outstanding. At Year 5, you believe that the company's sales will be $14,850,000 and the appropriate price-sales ratio is 2.2. The company’s WACC is 8.5 percent and the tax rate is 22 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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