Year 1 2 3 4 Free cash flow $30 million $35 million $40 million $45 million General Industries is expected to generate the above free cash flows over the next four years, after which they are expected to grow at a rate of 3% per year. If the weighted average cost of capital is 13% and General has cash of $100 million, debt of $80 million, and 50 million shares outstanding, what is General's expected current share price? a. $7.62 b. $7.87 C. $8.27 d. $8.42

Year 1 2 3 4 Free cash flow $30 million $35 million $40 million $45 million General Industries is expected to generate the above free cash flows over the next four years, after which they are expected to grow at a rate of 3% per year. If the weighted average cost of capital is 13% and General has cash of $100 million, debt of $80 million, and 50 million shares outstanding, what is General's expected current share price? a. $7.62 b. $7.87 C. $8.27 d. $8.42

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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#18
25 - For 2023, Volant Inc. is forecast to have Free Cash Flow to the Firm of $1.7 million and Free Cash Flow to Common Equity of $1.3 million. You forecast Free Cash Flow to the Firm to grow at a constant rate of 3.50% while Free Cash Flow to Common Equity grows at 4.00%. Volant’s tax rate is forecast to be 25%. You also collect the data shown below. Book Value Market Value Debt $14.5 million $15.0 million YTM: 4.24% Common Equity $21.0 million $45.0 million Rate of Return: 7.00% Calculate Volant’s Weighted Average Cost of Capital and round to 1 basis point. WACC:
#18
ff1
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.39 $38.8 $44 $52.8 $56.5 The weighted average cost of capital is 9%, and the FCFs are expected to continue growing at a 3% rate after Year 5. The firm has $24 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 20 million shares outstanding. What is the value of the stock price today (Year 0)? Round your answer to the nearest cent. Do not round intermediate calculations.$ per share
Chapter 7 Homework Problems t han KE CK Enterprises has the folowing expected dividends $1 06 in one year, $1 18 in two years, and $1.31 in three years. After that, is dividends are expected to grow at 43% per year forever (so that year s dividend will be 4.3% more than $1 31 and so on) CXS eaty cost of capital is 12 2%, what is the current price of its stock?
WACC Estimation On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $10 million in new projects. The firm's present market value capital structure, here below, is considered to be optimal. There is no short-term debt. Debt Common equity Total capital $30,000,000 30,000,000 $60,000,000 New bonds will have a 6% coupon rate, and they will be sold at par. Common stock is currently selling at $30 a share. The stockholders' required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.) The marginal tax rate is 25%. a. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? Round your answer to the nearest dollar. $ b. Assuming there is sufficient cash flow for Tysseland to maintain its target capital…
15
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.37 $38.7 $43.6 $51.8 $57 The weighted average cost of capital is 12%, and the FCFs are expected to continue growing at a 5% rate after Year 5. The firm has $25 million of market- value debt, but it has no preferred stock or any other outstanding claims. There are 20 million shares outstanding. What is the value of the stock price today (Year 0)? Do not round intermediate calculations. Round your answer to the nearest cent. per share According to the valuation models developed in this chapter, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock. The statement above is false $
hf.3

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