**Forecasting Free Cash Flows for Hadley Inc.**Hadley Inc. has forecasted the year-end free cash flows (in millions) as detailed below:| Year | 1 | 2 | 3 | 4 | 5 ||------|-------|------|-------|-----|-------|| FCF | -22.82 | 38.8 | 43.5 | 52 | 56.3 |**Analysis and Valuation Details:**- **Weighted Average Cost of Capital (WACC):** This is 12%.- **Future Growth Rate of FCFs:** The free cash flows (FCFs) are expected to continue growing at a rate of 3% after year 5.- **Debt and Equity Information:** - The firm holds $26 million in market-value debt. - There is no preferred stock or other outstanding claims.- **Shares Outstanding:** The company has 70 million shares.- **Assets:** The firm has zero non-operating assets.**Task:**Determine the value of the stock price today (Year 0), given all the information above.- Stock Price Formula: $\_\_\_$ per share.

The value of company can be found as the present value of free cash flow of the project and terminal…

The weighted average cost of capital is and the FCFS are expected to continue, year 5. The growing at a 3% rate after firm has $26 million of markat-value deb- but it has no preferred stuck or any other outstanding claims. There are 20 million Shares outstanding. Also, the firm has zero na greeds laat is the value of the

The weighted average cost of capital is and the FCFS are expected to continue, year 5. The growing at a 3% rate after firm has $26 million of markat-value deb- but it has no preferred stuck or any other outstanding claims. There are 20 million Shares outstanding. Also, the firm has zero na greeds laat is the value of the

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

Start-Up Industries is a new firm that has raised $400 million by selling shares of stock Management plans to earn a 20% rate of return on equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm. B. What will be Start-Up's ratio of market value to book value? Note: Do not round intermediate calculations. Market-to-book ratio b. What will be Start-Up's ratio of market value to book value if the firm can earn only a rate of return of 8% on its investments? Note: Do not round intermediate calculations. Round your answer to 1 decimal place. Market-to-book ratio
Heinfeldt Inc. forecasts the free cash flows (FCFs) (in millions) shown below. The weighted average cost of capital (WACC) is 12%, and the FCFs are expected to continue growing at a 4% rate after Year 3. The firm has $168.05 million of market - value debt, but it has no preferred stock or any other outstanding claims. There are 50 million shares outstanding. Year 1 2 3 FCF $80 $ 130 $200 a. What is the estimated stock price today ( Year 0)? b. Set up a simple Excel data table where you show how the estimated intrinsic value varies as the long - run growth rate varies over the following range (2.00%, 2.25%, 2.50%, 2.75%, 3.00%, 3.25%, 3.50%, and 4.75%) assuming everything else stays constant.
Mooradian Corporation's free cash flow during the just-ended year (t = 0) was $300 million, and its FCF is expected to grow at a constant rate of 7.5% in the future. Assume the firm has zero non-operating assets. If the weighted average cost of capital is 12.5%, what is the firm's total corporate value, in millions? a. $4,300 million b. $6,000 million c. $2,400 million d. $2,580 million e. $6,450 million
Yamana Gold Inc. (AUY) currently no pays dividend but its new management will pay a dividend at the end of Year 4. Year 4 earnings are expected to be $2.97, and AUY will maintain a payout ratio of 47%. With an assumption that AUY’s constant growth rate is 3.42%, and a required rate of return of 7.17%, the present value of AUY is closest to A. $30.24. B. $49.71. C. $70.92. D. $91.86.
5. SIROM Scientific Solutions has £12 million of outstanding equity and £4 million of bank debt. The bank debt costs 4% per year. The estimated equity beta is 1. If the market risk premium is 8% and the risk-free rate is 4%, calculate the weighted average cost of capital if the firm's tax rate is 30%. A. 8.73% B. 9.22% C. 9.70% D. 10.67%
Company Q's current return on equity (ROE) is 20%. It pays out 45 percent of earnings as cash dividends (payout ratio 0.45). Current book value per share is $56. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next two years. After that, competition forces ROE down to 10.0% and the payout ratio increases to 0.80. The cost of capital is 11.0%. Question: What is Q's stock worth per share? O 106.1 O 121.7 O 111.6 118.2 O 74.9
Barton Industries expects next year's annual dividend, D1, to be $2.30 and it expects dividends to grow at a constant rate g = 4.9%. The firm's current common stock price, P0, is $25.00. If it needs to issue new common stock, the firm will encounter a 4.5% flotation cost, F. What is the flotation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. _____% What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places. _____%
15. Two-stage DCF model (S4.4) Company Q's current return on equity (ROE) is 14%. It pays out one half of earnings as cash dividends (payout ratio = 0.5). Current book value per share is $50. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next four years. After that, competition forces ROE down to 11.5% and the payout ratio increases to 0.8. The cost of equity is 11.5%. a. What are Q's EPS and dividends next year? How will EPS and dividends grow in years 2, 3, 4, 5, and subsequent years? b. What is Q's stock worth per share? How does that value depend on the payout ratio and growth rate after year 4?
K SIROM Scientific Solutions has $4 million of outstanding equity and $12 million of bank debt. The bank debt costs 5% per year. The estimated equity beta is 1. If the market risk premium is 9% and the risk - free rate is 4%, compute the weighted average cost of capital if the firm's tax rate is 25%. OA. 6.71% OB. 5.8% C. 5.49% D. 6.1%
PLEASE SHOW ALL WORK AND FORMULAS IF ANSWERED CORRECTLY I WILL UPVOTE EMC Corporation has never paid a dividend. Its current free cash flow of $500,000 is expected to grow at a constant rate of 4.2%. The weighted average cost of capital is WACC = 10.5%. Calculate EMC's estimated value of operations. Round your answer to the nearest dollar.
29. Mackenzie Company has a price of $36 and will issue a dividend of $2.00 next year. It has a beta of1.2, the risk-free rate is 5.5%, and the market risk premium is estimated to be 5.0%. a. Estimate the equity cost of capital for Mackenzie. What ___% b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? What __% **round to two decimal places**
Holt Enterprises recently paid a dividend, Do, of $4,00. It expects to have a nonconstant growth of 16% for 2 years followed by a consent rate of 8% thereafter. The firm's required return is 20%. I know this answer was $48.44. I need help with the last part below. What is the firm's intrinsic value today, P0? Do not round intermediate calculations. Round your answer to the nearest cent.

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