Portage Bay Enterprises has $1 million in excess cash, no debt, and is expected to havefree cash flow of $13 million next year. Its FCF is then expected to grow at a rate of 2% peryear forever. If Portage Bay's equity cost of capital is 10% and it has 7 millionshares outstanding, what should be the price of Portage Bay stock?The price of Portage Bay's stock is $ per share. (Round to the nearest cent.)

Stock price refers to the price at which the shares are bought and sold by the investors in the…

Answered: Portage Bay Enterprises has $1 million…

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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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)
Boston Company has just paid dividends of $2.5 per share, which the company projects will grow at a constant rate of 5 percent forever. If Boston Company’s shareholders require 15 percent rate of return, what is the price of its common stock? Can you show the excel formula?
Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.72 per share and paid cash dividends of $2.02 per share (D0=$2.02). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 9% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 10% on investments with risk characteristics similar to those of Grips?
Scarab Technologies is expected to generate $175 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7% per year indefinitely. Scarab has no debt or preferred stock, and its WACC is 10%. If Scarab has 45 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. How much is each share of common stock is worth dollars, according to the corporate valuation model?
Shatin Intl. has 10 million shares, an equity cost of capital 12%, and is expected to pay a total dividend of $20 million each year forever. It announces that it will increase its payout to shareholders. Instead of increasing its dividend, it will keep it constant and will start repurchasing $12 million of stock each year as well. How much will its stock price increase? The stock price will increase by $ (Round to the nearest cent.)
Bloom Company Limited expects its EBIT to be $80,000 every year forever. The firm canborrow at 9 percent. The firm currently has no debt, and its cost of equity is 13 percent. Thetax rate is 35 percent. The firm will borrow $100,000 and use the proceeds to repurchase shares. You are required to answer the following:(a) What is the value of the unlevered firm? (b) What will be the value of firm after recapitalization? (c) What is the value of equity in the recapitalized firm? (d) What is the Weighted Cost of Capital of the levered firm?
NHL Inc.’s current return on equity (ROE) is 20%, its current book equity per share is $50, and it pays out half of its earnings as dividends. Both the ROE and payout ratio will stay constant for the next two years. After year 2, competition will force ROE down to 8%, and NHL will increase its payout ratio to 75%. The cost of capital is 10%. What is NHL’s stock price today?
NoGrowth Corporation currently pays a dividend of $1.72 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 12% per year?
You expect that Bean Enterprises will have earnings per share of $2 for the coming year. Bean plans to retain all of its earnings for the next three years. For the subsequent two years, the firm plans on retaining 50% of its earnings. It will then retain only 25% of its earnings from that point forward. Retained earnings will be invested in projects with an expected return of 20% per year. If Bean's equity cost of capital is 11%, then the price of a share of Bean's stock is closest to: A. $53.31 B. $33.32 *C. $19.99 D. $13.33
Trail Co. is expected to pay a cash dividend of $2.60 next year. This dividend isexpected to grow at 5% to infinity. If you require a return of at least 9%, what is themost you should be willing to pay for this share? Please use finance calculator and show the workings
11
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 11%. If Scampini has 50 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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