The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are someexamples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previousproblems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividendsare difficult to forecast. For that reason, some analysts use the corporate valuation model.Spandust Industries Inc. has an expected net operating profit after taxes, EBIT(1 - T), of $14,600 million in the coming year. In addition, the firm isexpected to have net capital expenditures of $2,190 million, and net operating working capital (NOWC) is expected to increase by $10 million. Howmuch free cash flow (FCF) is Spandust Industries Inc. expected to generate over the next year?O $12,420 million$16,780 million$12,400 millionO $297,740 millionSpandust Industries Inc.'s FCFS are expected to grow at a constant rate of 3.54% per year in the future. The market value of Spandust IndustriesInc.'s outstanding debt is $78,814 million, and its preferred stocks' value is $43,785 million. Spandust Industries Inc. has 150 million shares ofcommon stock outstanding, and its weighted average cost of capital (WACC) equals 10.62%.TermValue (Millions)Total firm valueIntrinsic value of common equityIntrinsic value per shareUsing the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firmhas no nonoperating assets.

EBIT(1-T) 14600 Net capital exp 2190 N.O.W.C 10 F.C.F 12400 F.C.F=E.B.I.T(1-T)-Net capital…

The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. pandust Industries Inc. has an expected net operating profit after taxes, EBIT(1 - T), of $14,500 million in the coming year. In addition, the firm is xpected to have net capital expenditures of $2,190 million, and net operating working capital (NOWC) is expected to increase by $10 million. How nuch free cash flow (FCF) is Spandust Industries Inc. expected to generate over the next year? O $12,420 million O $16,780 million O $12,400 million

The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. pandust Industries Inc. has an expected net operating profit after taxes, EBIT(1 - T), of $14,500 million in the coming year. In addition, the firm is xpected to have net capital expenditures of $2,190 million, and net operating working capital (NOWC) is expected to increase by $10 million. How nuch free cash flow (FCF) is Spandust Industries Inc. expected to generate over the next year? O $12,420 million O $16,780 million O $12,400 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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A firm is planning to borrow money to make an equity repurchase to increase its stock price. It is basing its analysis on the fact that there will be fewer shares outstanding after the repurchases, and higher earnings per share. There are no taxes. a. Will earnings per share always increase after such an action? Explain.b. Will the higher earnings per share always translate into a higher stock price? Explain.c. Under what conditions will such a transaction lead to a higher price?
Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? ... O A. They do not tell how the decision affects the firm's reported profits from an accounting perspective. O B. They are not easily predicted from historical financial statements of a firm and its competitors. O C. They do not show how the firm's earnings are expected to change as the result of a particular decision. O D. These earnings are not actual cash flows.
If the Modigliani and Miller hypothesis about dividends is correct, and if one found a group of companies which differed only with respect to dividend policy, which of the following statements would be most correct? Group of answer choices None of these statements is true. All of these statements are true. The total expected return, which in equilibrium is also equal to the required return, would be higher for those companies with lower payout ratios because of the greater risk associated with capital gains versus dividends. If the expected total return of each of the sample companies were divided into a dividend yield and a growth rate, and then a scatter diagram (or regression) analysis were undertaken, then the slope of the regression line (or b in the equation D1/P0 = a + b(g)) would be equal to +1.0. The residual dividend model should not be used, because it is inconsistent with the MM dividend hypothesis.
Which of the following statements about payout policy is FALSE? a. Share repurchases concentrate ownership in the hands of the remaining shareholders, making their shares worth more than they were before the repurchase. b. Firms should generally pay out no more than their free cash flow to equity, unless they are in the process of paying out a large cash balance. c. Dividends typically increase at a slower rate than earnings. d. Firms today return more cash to shareholders through repurchases than through dividends. e. Dividends are lower for firms that have higher growth rates.
"Address the limitations of traditional methods such as CAPM (Capital Asset Pricing Model) andDiscounted Cash Flow Analysis in valuing a company's stock price in non - stationary marketconditions. Particularly, discuss the consistency of the beta coefficient in determining the cost ofcapital and the selection of the risk - free rate. Also, evaluate how these traditional models can orcannot integrate non-financial factors (e. g., company management, brand value, industry trends).Lastly, discuss the alternative models used in stock valuation and the advantages and disadvantagesof these models compared to traditional methods."
The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you’ve done in previous problems, but it focuses on a firm’s free cash flows (FCFs) instead of its dividends. Some firms don’t pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Charles Underwood Agency Inc. has an expected net operating profit after taxes, EBIT(1 – T), of $17,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $2,610 million, and net operating working capital (NOWC) is expected to increase by $30 million. How much free cash flow (FCF) is Charles Underwood Agency Inc. expected to generate over the next year? $14,820 million $19,980 million $321,693 million $14,760 million…
Give your thoughts on the prompts below Firms use market capitalization when considering the market value added. We have seen that a number of things can affect capitalization values, so is this really the best method to use? A well known company recently had a 20-1 stock split that drew a lot of attention...how does this affect their market value added? Administrative errors can have a big impact in receivables turnover and payment delay ratios, so companies should include administrative and other indirect costs in the calculations of those ratios. Agree or Disagree and defend your answer.

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