Venice Surf Co. expects to generate free cash flows over the next three years of $22 million, $31 million, and $42 million, respectively. In addition, the terminal value of all free cash flows expected to be generated after Year 3 is $436 million. The company's nonoperating assets equal $41 million and its nonoperating liabilities equal $185 million. There are 17 million shares outstanding. Estimate the value of each share of common stock using the free cash flow data provided, and assuming a weighted average cost of capital of 11%. Present your answer to two decimal places, e.g., $23.45.

Venice Surf Co. expects to generate free cash flows over the next three years of $22 million, $31 million, and $42 million, respectively. In addition, the terminal value of all free cash flows expected to be generated after Year 3 is $436 million. The company's nonoperating assets equal $41 million and its nonoperating liabilities equal $185 million. There are 17 million shares outstanding. Estimate the value of each share of common stock using the free cash flow data provided, and assuming a weighted average cost of capital of 11%. Present your answer to two decimal places, e.g., $23.45.

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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West Wind Inc. has 5,000,000 shares of common stock outstanding with market value of $60 per share. Net income for the coming year is expected to be $6,900,000. What impact will a three-for-one stock split have on earnings per share and on the price of the stock?
An analyst has collected the following information regarding Christopher Co.: · The company's capital structure is 70 percent equity, 30 percent debt. · The yield to maturity on the company's bonds is 5 percent. · The company's year-end dividend (D1) is forecasted to be $0.8 a share. · The company expects that its dividend will grow at a constant rate of 5 percent a year. · The company's stock price is $25. · The company's tax rate is 40 percent. · The company anticipates that it will need to raise new common stock this year. Its investment bankers anticipate that the total flotation cost will equal 10 percent of the amount issued. Assume the company accounts for flotation costs by adjusting the cost of capital. Given this information, calculate the company's cost of new equity. Round it to two decimal places.
The cost of capital is 15% and net income to stockholders generated over the past year and available for present investment, amounts to $1,000,000. The firm has 1,000,000 common shares outstanding, currently trading at a price of $10.50 per share. A new issue of shares would require a flotation cost of $0.50 per share. Calculate the dividend per share, the dividend payout ratio, the dividend yield, and the number of new shares Essex will have to issue.
Your company has expected future cash flows of $70 million in perpetuity. The company's WACC is 12.8%. The company has $337 million in debt, and $188 million in excess cash, and 12 million shares. What is the share price of the company?
AFW Industries has 180 million shares outstanding and expects earnings at the end of this year of $735 million. AFW plans to pay out 56% of its earnings in total, paying 37% as a dividend and using 19% to repurchase shares. If AFW's earnings are expected to grow by 8.9% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 12.6%. The price per share will be $ (Round to the nearest cent.)
Blue TJ’s has a market value equal to its book value. Currently, the firm has excess cash of $389,000, other assets of $911,674, and equity of $886,200. The firm has 60,000 shares of stock outstanding and net income of $984,800. Management has decided to spend 20 percent of the firm’s excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?
Examine the following book-value balance sheet for University Products Incorporated. The preferred stock currently sells for $15 per share and pays a dividend of $3 a share. The common stock sells for $20 per share and has a beta of 0.7. There are 2 million common shares outstanding. The market risk premium is 12%, the risk-free rate is 8%, and the firm's tax rate is 21%. BOOK-VALUE BALANCE SHEET Liabilities and Net Worth (Figures in s millions). Assets Cash and short-term securities $ 1.0 Bonds, coupon = 6%, paid annually (maturity = 10 years, current yield to maturity = 8%) $ 10.0 Accounts receivable 4.0 Preferred stock (par value $20 per share) 3.0 Inventories Plant and equipment 8.0 24.0 Common stock (par value $0.10) 0.2 Additional paid-in stockholders' equity Retained earnings 10.8 13.0 Total $ 37.0 Total $ 37.0 a. What is the market debt-to-value ratio of the firm? b. What is University's WACC? Note: For all the requirements, do not round intermediate calculations. Enter your…
AFW Industries has 211 million shares outstanding and expects earnings at the end of this year of $652 million. AFW plans to pay out 58% of its earnings in total, paying 30% as a dividend and using 28% to repurchase shares If AFW's earnings are expected to grow by 8.3% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 11.2% The price per share will be $ (Round to the nearest cent.)
How much is each share using DCF method. 98 million per year next three years, expected to grow at a steady rate in perpetuity thereafter. Cost of capital is 11.7%. The company has 80 million of debt and 8 million in cash. There are 18 million shares outstanding. The average EV/FCFF multiple of comparable companies is 10.7.
Assume that you have just purchased some shares in an investment company reporting $575 million in assets, $35 million in liabilities, and 25 million shares outstanding. What is the net asset value (NAV) of these shares?
Roxie Epoxy’s balance sheet shows a total of $50 million long-term debt with a coupon rate of 8.00% and a yield to maturity of 7.00%. This debt currently has a market value of $55 million. The balance sheet also shows that that the company has 20 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $8.50 per share; stockholders' required return, rs, is 12%; and the firm's tax rate is 25%. Based on market value weights, and assuming the firm is currently at its target capital structure, what WACC should Roxie use to evaluate capital budgeting projects?
Assuming Nike's stock price is $68 per share, shares outstanding are $1,600 million, and the company plans to raise $1,000 million in capital with a projected EBIT of $10 billion, how many new shares must Nike sell?

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