Question 3Gilmore Limited has the following projected equity cash flows (FCFE) and enterprisefree cash flows (FCFF) over the next five years:$ millionsYearFCFEInterest (1 - t)FCFF112030150212532157313233165414035175515037187TerminalValue2,5004,200Note: terminal value is the value at the end of year 5.Gilmore Limited has a cost of equity of 12% and a WACC of 8%.a. What is the value of the equity?b. What is the value of the operations?

a) Cost of equity (i) = 12% Value of equity = FCFE1/(1+i) + FCFE2/(1+i)^2 + ..... + FCFE5/(1+i)^5 +…

Answered: Gilmore Limited has the following…

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

See similar textbooks

Similar questions

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
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?
The annual report of 2019 which shows an EBITDA of P5,000,000 and a total liability of P15,550,000. Evidently, the sales grew by 12% annually with a direct effect on the growth of free cash flow of 12% yearly. Last year, the free cash flow was reported to be P3,500,000. The weighted average cost of capital is 10%. Using the financial model, how much is the value of the equity?
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
A firm has a profit margin of 2% and an equity multiplier of 2.0. Its sales are $100 million, and it has total assets of $50 million. What is its ROE? Find the following values and solve all the subparts. Compounding/discounting occurs annually. a. An initial $500 compounded for 10 years at 6%b. An initial $500 compounded for 10 years at 12%c. The present value of $500 due in 10 years at 6%d. The present value of $1,552.90 due in 10 years at 12% and at 6%e. Define present value and illustrate it using a time line with data from Part d. How arepresent values affected by interest rates?
A firm after -tax operating income ( after-tax EBIT)$90,000 in 2018. The value of depreciation is $8000 in 2018. Operating working capital increased by $20,000, and the firm purchased $30,000 of assets. The firm's free cash flow is Given the rate information in the table belowCan you calculate the maturity risk premium? 3 month T-bill = 2.5% (risk-free rate), 30 years Bonds-5.0%, 30year corporate bonds 7.0% Inflation Rate- 3.6% and the liquidity risk premium is 0.03%
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) Suppose you borrow $2,000 at the annual interest rate of 9%, and you are required to pay it back in 12 equal monthly installments, the first one is due at the end of the first month. i) How much is the monthly installment? ii) Draw up an amortization schedule. b) BK Ltd has just paid a dividend per share of $1.20. Shares are valued only based on expected dividends. An annual sustainable growth of dividends of 4% is assumed. The appropriate discount rate (i) is 10% per year. The planning horizon is limited to 20 years. Compute the share value.
Crane Sporting is a listed company in New York. Its current before-interest, after-tax operating cash flow is $200 million. The cash flows are expected to grow at 8% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available: Tax rate 30% Risk-free rate 5% Market return 15% Equity beta 2 Cost of debt 10% D/E 60% question Using the “free cash flow” methodology, the value of Crane Sporting is closest to: A. $1,531 million B. $1,072 million C. $717 million D. None of the above
A business will have net inflows of € 20 million, € 12 million, € 11 million, € 8 million, and € 5 million. for the next five years. Its current book value is € 30 million. The company has issued 10,000 bonds with an annual interest rate of 3%, with a nominal value of € 1,000 each and maturing in five years. If the market rate is 4%, what is the value of the business, bond and share capital?
News Corp is expected to pay a dividend of $0.8 in one year. The dividend is expected to grow at 12% in the following 3 years and then at a constant rate of 4% per annum indefinitely. If the required rate of return is 12%, what is the price of the company's share today? Please illustrate your answer using a timeline.
ACME Software Company has CURRENT (i.e. today; year "zero") market value of its venture's assets of $250K (effectively its current equity valuation cash flow). Forecasted cash-flows for next 5 years is as follows: Year 1: ($350,000), i.e. negative Year 2: ($100,000) Year 3: $250,000, i.e. positive Year 4: $450,000 Year 5: $500,000 Year 6+: Assume $600K in year 6, growing at 6% annually thereafter Years 1-5 discount rate of 40% Years 6+ assume 15% given company should be more mature, less risky, and more predictable. Given the same information as the previous question, how much %ownership (rounded) would a $250,000 investment fetch assuming the NPV of the ACME Software (the pre-money valuation) you just calculated?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS