Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to have free cash flow of $9 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Portage Bay's equity cost of capital is 13% and it has 8 million shares outstanding, what should be the price of Portage Bay stock?

Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to have free cash flow of $9 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Portage Bay's equity cost of capital is 13% and it has 8 million shares outstanding, what should be the price of Portage Bay stock?

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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Milton Inc. is an all-equity firm and investors expect it to remain an all-equity firm in the future. It has 100 million shares outstanding and is subject to a 40% corporate tax rate. It has no excess cash. The cost of equity is 20%. The firm is expected to generate free cash flows of $100 million per year forever, with the first free cash flow coming exactly one year from now (in December 2020). (a) What is the current stock price of Milton Inc.? Suppose that today, Milton Inc. makes a surprise announcement that it will issue $200 million worth of perpetual debt (i.e., it will maintain a constant debt level of $200 million forever) with coupon rate 8%, which coincides with its cost of debt. Milton will use the proceeds from the issuance of debt to repurchase stocks. Assume that the recapitalization will take place very soon, within a few days. (b) What will be the total value of the firm after the recapitalization described above? (c) What will be the total value of equity (i.e., the…
Summit Systems will pay a dividend of $1.52 this year. If you expect Summit's dividend to grow by 6.7% per year, what is its price per share if the firm's equity cost of capital is 11.8% ? The price per share is $ (Round to the nearest cent.).
Manshukh
Von Bora Corporation (VBC) is expected to pay a $4.00 dividend at the end of this year. If you expect VBC's dividend to grow by 4% per year forever and VBC's equity cost of capital is 13%, then the value of a share of VBS stock is closest to:
Scampini Technologies is expected to generate $100 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 14%, and it has zero nonoperating assets. If Scampini has 55 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth
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K Zoom Enterprises expects that one year from now it will pay a total dividend of $4.8 million and repurchase $4.8 million worth of shares. It plans to spend $9.6 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is 13.2% and it has 4.7 million shares outstanding, what is its share price today? The price per share is $ (Round to the nearest cent.)
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Zoom Enterprises expects that one year from now it will pay a total dividend of $4.5 million and repurchase $4.5 million worth of shares. It plans to spend $9.0 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is 13.5% and it has 4.9 million shares outstanding, what is its share price today?
Scampini Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of 5% per year indefinitely. Scampini has no debt, preferred stock, or non-operating assets, and its WACC is 15%. If Scampini has 35 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth $ , according to the corporate valuation model.
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Zoom Enterprises expects that one year from now it will pay a total dividend of $4.9 million and repurchase $4.9 million worth of shares It plans to spend $9.8 million on dividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases If Zoom's equity cost of capital is 12 5% and it has 5 4 million shares outstanding, what is its share price today? The price per share is $ (Round to the nearest cent)

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