Vijay Problem 9-28 Stock Valuation and Cash FlowsFull Boat Manufacturing has projected sales of $121.5 million next year. Costs areexpected to be $72 million and net investment is expected to be $14.15 million. Each ofthese values is expected to grow at 14 percent the following year, with the growth ratedeclining by 2 percent per year until the growth rate reaches 6 percent, where it isexpected to remain indefinitely. There are 6 million shares of stock outstanding andinvestors require a return of 12 percent return on the company's stock. The corporate taxrate is 23 percent.a. What is your estimate of the current stock price? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)b. Suppose instead that you estimate the terminal value of the company using a PEmultiple. The industry PE multiple is 12. What is your new estimate of the company'sstock price? (Do not round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.)Answer is complete but not entirely correct.a. Share price$78.56b. Share price$77.22 ×

Let's review the discrepancies between your calculated values and the provided answers.For part a,…

Answered: Problem 9-28 Stock Valuation and Cash…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 24P

See similar textbooks

Similar questions

Nikul
7 Full Boat Manufacturing has projected sales of $123.5 million next year. Costs are expected to be $73.6 million and net investment is expected to be $14.75 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6.4 million shares of stock outstanding and investors require a return of 11 percent return on the company’s stock. The corporate tax rate is 22 percent. What is your estimate of the current stock price? A. 89.39 B. 88.53 C. 93.98 D. 85.33
Problem 6-32 Stock Valuation and Cash Flows Anya Manufacturing has projected sales of $116 million next year. Costs are expected to be $67.2 million, and net investment is expected to be $12.6 million. Each of these values is expected to grow at 10 percent the following year, with the growth rate declining by 1 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 4.9 million shares of stock outstanding and investors require a return of 11 percent on the company’s stock. The corporate tax rate is 22 percent. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 13. What is your new estimate of the company’s stock price? (Do not round intermediate calculations and round your answer to 2 decimal places,…
Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of $115 million next year. Costs are expected to be $67 million and net investment is expected to be $12 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 per- cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 21 percent. a. What is your estimate of the current stock price? b. Suppose instead that you estimate the terminal value of the company using a PE mul- tiple. The industry PE multiple is 11. What is your new estimate of the company's stock price?
Problem 18-12 The stock of Nogro Corporation is currently selling for $30 per share. Earnings per share in the coming year are expected to be $4.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 16% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return % b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) PVGO
Problem 10.20 (WACC) The following tuble gives Foust company's earnings Per share for the last 10 years. The common Stock, 8.1 million shares outstanding, is now (1/1/22) selling for $51.00 per share, The expected dividend at the end of the current year (12/31/22) is 60%. of the 2021 EPS. Because investors expect past trends to continue, S may be based on the historical earnings growth rate. (Note that a years are reflected in the 10 years of data). EPS $5,73 6.19 6.68 Year 2012 2013 2014 2015 2016 J b). Find Foust's WACC % ^ EPS $3.90 4.21 4,55 4.91 5.31 Year 2017 2018 2019 The current interest rate on new debt is 10%, Foust's marginal rate is 25%; and its target capital Structure is 45%, debt and 55%, equity a), (almlate Foust's after-tax cost of debt, 2020 2021 (ulmlate Foust's cost of common equity. Calculate the cost of equity as r5 = D₁/ Po+g. Round your answers to two decimal places. 7.22 7.80
View Policies Current Attempt in Progress Wildhorse Corp. is expected to grow rapidly at a rate of 35 percent for the next seven years. The company's first dividend, to be paid three years from now, will be $5. After seven years, the company (and the dividends it pays) will grow at a rate of 6.25 percent. What is the value of Wildhorse stock with a required rate of return of 14 percent? (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.20.) Value of stock $ eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer
F1
te.3
Find the expected return on Red Line Brewery's stock that is trading at $70 per share and is expected to pay its next annual dividend of $1.9 in exactly 1 year. The dividend is expected to grow 3.1% per year. 4.15% 4.62% 4.56% 4.91% 5.81%
Problem 1 You are considering purchasing a share of Belgravia Petroleum Inc. The company just announced its earnings per share of $2.50. Management predicts that earnings will grow at 10% per year for the next 4 years and then at 1% thereafter. Belgravia's policy is to pay out 40% of its earnings in dividends. The discount rate for Belgravia is 12%. How much is the stock price of Belgravia?
QUESTION 9 A company forecasts that the following sales: 118 BD in May, 138 BD in June and 285 BD in July. Sales will be paid in three parts, 30% will be paid in cash, another 30% will be paid after one month and the remining 40% will be paid after two months. Additionally, the company will receive 42 BD in dividends in July, and 198 BD from the sale of stocks in May. Based on the information given what is the anticipated total cash receipts for the month of July?

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Fundamentals of Financial Management, Concise Edi…

Finance

ISBN:

9781285065137

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Fundamentals Of Financial Management, Concise Edi…

Finance

ISBN:

9781337902571

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS