Save An You are trying to estimate the share price for Heavyweight Inc. Heavyweight currently has 40 million shares outstanding, a cost or equity of 20%, a cost of debt of 5%, and a marginal tax rate of 20%. The firm has no excess cash and maintains a debt-to-enterprise value ratio of 55%. It is expected to generate free cash flows of $150 million at the end- the year and free cash flows are expected to grow at an annual rate of 2% in perpetuity. Given this information, and using the WACC method, what is the best estimate for Heavyweight's share price? Select one L$18.34 $17.31 111 $22.42 IV. $16.49

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
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You are trying to estimate the share price for Heavyweight Inc. Heavyweight currently has 40 million shares outstanding, a cost or equity of 20%, a cost of debt of 5%, and a
marginal tax rate of 20%. The firm has no excess cash and maintains a debt-to-enterprise value ratio of 55%. It is expected to generate free cash flows of $150 million at the end of
the year and free cash flows are expected to grow at an annual rate of 2% in perpetuity. Given this information, and using the WACC method, what is the best estimate for
Heavyweight's share price? Select one
OL$18.34
$17.31
11, $22.42
ON.$16.49
Transcribed Image Text:Save Answer Question 3 You are trying to estimate the share price for Heavyweight Inc. Heavyweight currently has 40 million shares outstanding, a cost or equity of 20%, a cost of debt of 5%, and a marginal tax rate of 20%. The firm has no excess cash and maintains a debt-to-enterprise value ratio of 55%. It is expected to generate free cash flows of $150 million at the end of the year and free cash flows are expected to grow at an annual rate of 2% in perpetuity. Given this information, and using the WACC method, what is the best estimate for Heavyweight's share price? Select one OL$18.34 $17.31 11, $22.42 ON.$16.49
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