Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.5% peryear. Using the discounted free cash flow model and a weighted average cost of capital of 14.7%:a. Estimate the enterprise value of Heavy Metal.b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price.a. Estimate the enterprise value of Heavy Metal.The enterprise value will be $million. (Round to two decimal places.)b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price.The stock price per share will be $ (Round to the nearest cent.)

Certainly! Let's break down the calculations step by step.a. Enterprise Value Calculation using…

Answered: Heavy Metal Corporation 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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Dyrdek Enterprises has equity with a market value of $1.8 million and the market value of debt is $3.55 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 1.6 percent. The new project will cost $2.20 million today and provide annual cash flows of $576,000 for the next 6 years. The company's cost of equity is 11.07 percent and the pretax cost of debt is 4.88 percent. The tax rate is 21 percent. What is the project's NPV?
Demon Corporation expects to generate free-cash flows of $200,000 per year for each of the next five years. Beyond the five years and into perpetuity, free cash flows are expected to grow at a constant rate of 5 percent per year forever. The firm's weighted average cost of capital is 15 percent. The firm’s market value of debt is $500,000 and there is no preferred stock. What is the market value of Demon Cop. equity?
A company is projected to generate free cash flows of $457 million next year, growing at a 4.4% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.8%. The company's cost of capital is 10.1%. The company owes $268 million to lenders and has $24 million in cash. If it has 179 million shares outstanding, what is your estimate for its share value? Round to one decimal place.
Vrooom is a car dealership that determined the present value of its free cash flow to common equity for the first five years to be $272,000 and the present value in its terminal year to be $228,000. The expected growth rate is 2.2% and the firm’s cost of common equity is 4.2%. What is the terminal value of the dealership?
An analyst is trying to estimate the intrinsic value of Blue Co. that has a weighted average cost of capital at 10%. The estimated free cash flows for the company for the following years are: Year 1 P3,000 Year 2 P4,000 Year 3 P5,000 The analyst estimates that after three years, free cash flow will grow at a constant annual percentage of 6%. What is the total intrinsic value of the company's common stock if combined debt and preferred stock has a P25,000 market value? *
BC Corporation has a weighted average cost of capital of 16%. What is its value if it will provide earnings to investors of P100,000 for the first year, P200,000 for the second year and P250,000 for every year onwards. a. P1,396,031.51 b. P1,225,861.02 c. P1,797,339.48 d. P1,617,271.54 e. None among the other choices
The Indy Company experiences the following annual incomes over the last five years: $60,000, $70,000, $110,000, $150,000, $160,000. A firm like Indy Company commands a 13% discount rate and has a long term growth rate of 3% considering the capitalization of earnings method. Using a non-weighted earnings model, what is the approximate value of the firm (rounded)?
Al-Shamukh Constructors Ltd.currently has sales of OMR 24 million a yearwith a stock level of 25 percent of the sales Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of tocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales then what will be the improvement (or reduction ) in the rate of return on asset in percentage?
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
Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.
Dyrdek Enterprises has equity with a market value of $10.4 million and the market value of debt is $3.35 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 1.2 percent. The new project will cost $2.12 million today and provide annual cash flows of $556,000 for the next 6 years. The company's cost of equity is 10.91 percent and the pretax cost of debt is 4.84 percent. The tax rate is 39 percent. What is the project's NPV?
National Co. make these assumptions for valuation purposes:a. The firm consists of a single asset that will generate pretax net cash flows of P3,000,000 per year forever.b. The income tax rate is 25%.c. After making paying taxes, the firm pays dividends to distribute any remaining cash flows to the equity shareholders each year.d. Equity shareholders have financed the asset entirely with P100,000,000 of equity capital.e. The cost of equity capital is 12%.Compute for the value of the firm to the shareholders using dividend discount model?

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