The discounted value of the Terminal Value (using the Perpetulty method) in your DCF analysis appears too low. The mistake couldbe:1. You forgot to grow the last projected year's UFCF by one year before calculating the Terminal Value2. Your estimated EVJEBITDA multiple for the Terminal Value is too low3. Your Equity Risk Premium needs to be reduced4. You should discount the Terminal Value over more years5. You should subtract the risk-free rate while calculating the Cost of Equity to decrease the WACCⒸ1 and 21 and 32,4 and 514 ands

In finance, the discounted cash flow (DCF) analysis is a commonly used valuation method to determine…

The discounted value of the Terminal Value (using the Perpetulty method) in your DCF analysis appears too low. The mistake could be: 1. You forgot to grow the last projected year's UFCF by one year before calculating the Terminal Value 2. Your estimated EVEBITDA multiple for the Terminal Value is too low 3. Your Equity Risk Premium needs to be reduced 4. You should discount the Terminal Value over more years 5. You should subtract the risk-free rate while calculating the Cost of Equity to decrease the WACC O1 and 2 3 and 4 1 and 3 2.4 and 14 ands

The discounted value of the Terminal Value (using the Perpetulty method) in your DCF analysis appears too low. The mistake could be: 1. You forgot to grow the last projected year's UFCF by one year before calculating the Terminal Value 2. Your estimated EVEBITDA multiple for the Terminal Value is too low 3. Your Equity Risk Premium needs to be reduced 4. You should discount the Terminal Value over more years 5. You should subtract the risk-free rate while calculating the Cost of Equity to decrease the WACC O1 and 2 3 and 4 1 and 3 2.4 and 14 ands

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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Similar questions

Which of the following is correct? O A. Common stock valuation usually treats the common stock as a perpetuity. OB. The appropriate measure for risk according to the capital asset pricing model is beta. OC. The present value of a $100 perpetuity discounted at 5% is $2,000. OD. The incremental cost is the cost of making a choice defined in terms of the next best alternative that is foregone. OE. Both B and C.
The expected return for the investment is ??? The standard deviation is ??? While the expected return for the risk-free assets, Treasury Bills, is ??? The standard deviation is ???
You are managing a pension fund with a value of $360 million and a beta of 1.30. You are concerned about a market decline and wish to hedge the portfolio. You have decided to use SPX calls. How many contracts do you need if the delta of the call option is 0.64 and the S&P index is currently at 3, 300 ? Note: Do not round intermediate calculations. A negative value should be indicated by a minus sign. Round your answer to the nearest whole number.
Suppose you have a project that has a 0.6 chance of doubling your investment in a year and a 0.4 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Answer is complete but not entirely correct. 40.99 Standard deviation %
The terminal cap rate used for valuation purposes in a DCF is fundamentally different than the discount rate used in that same DCF. The assumed sale of the property takes place at the end of your hold period, generally 10 years later in most models. The property is older and the market and the economy have changed. With that said, what do you believe to be the right approach for terminal cap rate selection in a DCF on a development project and why?
You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19, 600to invest, how many shares can you buy?
In Simpleland, there are only two risky assets in the market, A and B. The information and CAPM estimates of A and B are shown in the following table: A 100 Million 0.09 Market Capitalisation ($) |Variance (o²) Covariance between A and B Expected Return on Market Risk free rate 400 Million 0.01 0.2 20% 10% The manager believes that in the near future, B will outperform A by 5% with uncertainty measured in variance 0.0005. He has also assigned the error of estimating the above CAPM model in terms of variance to be 0.01, i.e. T = 0.01. a) What is the expected return of A and B under CAPM? 2.
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