KRestex has a debt-equity ratio of 0.56, an equity cost of capital of 13%, and a debt cost of capital of 9%. Restex's corporate tax rate is 20%, and its market capitalization is $153 million.a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's currentmarket value?b. Estimate the value of Restex's interest tax shield.a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's currentmarket value?If Restex's free cash flow is expected to be $4 million in one year, the expected future growth rate is % (Round to two decimal places)b. Estimate the value of Restex's interest tax shield.Interest tax shield value is $million. (Round to the nearest million.

The objective of the question is to calculate the expected future growth rate that is consistent…

Answered: K Restex has a debt-equity ratio of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 million
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Give me the answer
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Banco Tech is an early stage financial technology firm. Earnings this year where $20 per share and are expected to grow at 20% per year for the next three years. Banco does not plan to pay a dividend until three years time, when the payout ratio will be 43%. Dividends are expected to grow at 6% thereafter. The required rate of return is 9%. Calculated intrinsic value.
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