You have valued the operating assets of Hopscotch Entertainment, a small movie company, and arrived at a present value of $1815 million (by discounting FCFF at the cost of capital). The company has net debt of $459 million and 120 million shares outstanding. The company also has 15 million options outstanding, and you

You have valued the operating assets of Hopscotch Entertainment, a small movie company, and arrived at a present value of $1815 million (by discounting FCFF at the cost of capital). The company has net debt of $459 million and 120 million shares outstanding. The company also has 15 million options outstanding, and you

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

See similar textbooks

Related questions

Q: Use the following information about SV Inc. to calculate the company’s Cost of Capital. The stock…

A: Hi, since the question posted has multiple subparts, I will answer the three sub-parts of Section B.…

Q: The estimated pre-IPO value of equity in thecompany is about $63 million and there are 4million…

A: The computations as follows: New owners spend $19.68 million, providing a share of equity equal to…

Q: All computations must be done and shown in detail a) You currently own 600 shares of JKL, Inc. JKL…

A: Total number of shares owned=600All equity firm has a number of shares=75,000Earnings before…

Q: The shares of a company trade today for $37. The company is fairly valued at this current price.…

A: A share repurchase, often known as a buyback, is a decision made by a corporation to acquire its own…

Q: Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will…

A: The question is based on the concept of Shares

Q: Nemesis, Incorporated, has 136,000 shares of stock outstanding. Each share is worth $110, so the…

A: Right shares are issued to the existing shareholders to raise money for growth and expansion of the…

Q: The Meadows Corporation needs to raise $62 million to finance its expansion into new markets. The…

A: Equity represents the ownership of the investors in the companies which are also known as stocks. It…

Q: Don’s Captain Morgan, Inc. needs to raise $12.70 million to finance plant expansion. In discussions…

A: The offer price for the share is $20.60.The receivable price per share is $16.75.The underwriter…

Q: ABC SA. is financed solely by equity. Currently, the company has 20 million shares outstanding.…

A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

Q: security

A: Introduction: The two types of securities that would be issued by a company would include debt &…

Q: Harper Industries has $300 million of common equity on its balance sheet; its stock price is $80 per…

A: Book Value of common equity= $300,000,000 Market Value (MVA)= $50,000,000 Price per share= $80 per…

Q: Built Rite Corp. is evaluating an extra dividend versus a share repurchase. In either case, $7,500…

A: Calculation of the worth of investment: i)In case of receipt of dividend Dividend received…

Q: Assuming 100% exercise of rights, what are the (1) ex-rights stock price, (2) the value of a right,…

A: A rights issue also known as a rights offering is a method used by a company to raise additional…

Q: In previous years, Cox Transport reacquired 3 million treasury shares at $25 per share and, later, 1…

A: Treasury shares: It refers to that section of previously issued shares that are brought back from…

Q: Angina Inc. has 5 million shares outstanding. The firm is considering issuing an additional 1…

A: Calculate the net proceedings as follows:

Q: You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.),…

A: Calculation of Income available for asset funders and Return on asset-funders\' investment:Excel…

Q: The Meadows Corporation needs to raise $70 million to finance its expansion into new markets. The…

A: SharesA company issues shares as an unit of ownership of the company. When an individual buys the…

Q: You are considering a stock investment in one of two firms (NoEquity, Incorporated, and NoDebt,…

A: Total assets of company include debt and equity and return on assets is amount of percentage net…

Q: You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both…

Q: Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will…

A: An underwriting expense or fees is the amount that a firm gets because of facing the challenge. With…

Q: Damron, Incorporated, has 205,000 shares of stock outstanding. Each share is worth $79, so the…

A: The ex-rights price is the market price of shares after the issuance of new rights shares. Due to an…

Q: Angina Inc has 5 million shares outstanding The firm is considering issuing an additional 1 million…

A: Proceeds from stock sale = Number of shares issued * Offer price per share.Net proceeds from stock…

Question

You have valued the operating assets of Hopscotch Entertainment, a small movie company, and arrived at a present value of $1815 million (by discounting FCFF at the cost of capital).

The company has net debt of $459 million and 120 million shares outstanding.

The company also has 15 million options outstanding, and you have valued each option at $3/option.

The company also has 15 million restricted shares (not included in the current share count)

Estimate the value per share

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 per share. The current weighted average cost of capital is 7%. It also carries long-term debt of $200,000 at an interest rate of 7% p.a. One of the agenda items in its AGM is to switch to a D/E of 1. Based on this information, answer the following questions All computations must be done and shown in detail : a) What will be the number of outstanding shares for Jimmy Shoes Inc. if it switches to a D/E ratio of 1? (Hint: Current Debt = $200,000, current equity = 10,000 shares x $40 = $400,000, current D/E = 2/4 = 0.5/1. If the firm seeks to increase its D/E to 1, it can think of borrowing more) b) What is the level of EBIT at which shareholders will be indifferent between the two capital structures, the one with a D/E = 0.5/1 and the other with a D/E of 1?
You are considering investing in Henderson Engineers Ltd. The book value of shareholders' equity is $40,0000,000. The firm has made a net profit of $ 660,000 for the year ending 30 June 2023. The earnings per share is $1.30. You also find the PE ratio for firms similar to Henderson is 12. a) What is the book value per share for Henderson Engineers Ltd? b) What price would you expect Henderson shares to sell for? c) Explain would you invest in this share and why.
Trini Exports has a current market value of equity of $315,000. Currently, the firm has excess cash of $108,000, total assets of $424,000, net income of $113,000, and 3500 shares of stock outstanding. Trini Exports is going to use all of its excess cash to repurchase shares of stock. What will the stock price per share be after the stock repurchase is completed? (Show all workings)
Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 per share. The current weighted average cost of capital is 7%. It also carries long-term debt of $200,000 at an interest rate of 7% p.a. One of the agenda items in its AGM is to switch to a D/E of 1. Based on this information,answer the following questions: a) What will be the number of outstanding shares for Jimmy Shoes Inc. if it switches to a D/E ratio of 1? (Hint: Current Debt = $200,000, current equity = 10,000 shares x $40 = $400,000, current D/E = 2/4 = 0.5/1. If the firm seeks to increase its D/E to 1, it can think ofborrowing more)b) What is the level of EBIT at which shareholders will be indifferent between the two capital structures, the one with a D/E = 0.5/1 and the other with a D/E of 1?
Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 per share. The current weighted average cost of capital is 7%. It also carries long-term debt of $200,000 at an interest rate of 7% p.a. One of the agenda items in its AGM is to switch to a D/E of 1. Based on this information, answer the following questions: a) What will be the number of outstanding shares for Jimmy Shoes Inc. if it switches to a D/E ratio of 1? (Hint: Current Debt = $200,000, current equity = 10,000 shares x $40 = $400,000, current D/E = 2/4 = 0.5/1. If the firm seeks to increase its D/E to 1, it can think of borrowing more)
FedEx Corporation (FDX) has a current share price of $157.62 and is expected to have earnings per share (EPS) next year of $11.32 per share. Analysts expect that FedEx's closest competitor, United Parcel Service, Inc. (UPS), will have earnings next year of $8.37 per share. FedEx's cost of capital is 11%. What is your current estimate of the value of one share of UPS stock using the method of comparables? OA. $213.17 OB. $76.09 OC. $13.92 OD. $116.54 OE. $154.67 OF. None of the above is withing $0.35 of the value of one share of UPS stock.
FedEx Corporation (FDX) has a current share price of $157.56 and is expected to have earnings per share (EPS) next year of $11.04 per share. Analysts expect that FedEx's closest competitor, United Parcel Service, Inc. (UPS), will have earnings next year of $8.33 per share. FedEx's cost of capital is 11%. What is your current estimate of the value of one share of UPS stock using the method of comparables? OA. $118.88 OB. $208.82 OC. $75.73 OD. $14.27 OE. $154.85 OF. None of the above is withing $0.35 of the value of one share of UPS stock. C
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,300 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,300 worth of stock. Ignore taxes. Assets Liabilities and Equity Cash $ 8,000 Debt $ 11,500 Fixed assets 29,500 Equity 26,000 a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $32,300 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $32,300 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $32,300 a year,…
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,300 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,300 worth of stock. Ignore taxes. Assets Liabilities and Equity Cash $ 8,000 Debt $ 11,500 Fixed assets 29,500 Equity 26,000 a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $32,300 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $32,300 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $32,300 a year,…
Cliff Corp. (CC) has an enterprise value (MV equity + debt – cash) of $330 million, $50 million in cash and $30 million in debt. CC has 10 million shares outstanding and is considering using its $50 million in cash to repurchase shares. What s CC’s share price prior to the prior to the repurchase? How many shares will CC repurchase? Suppose news is released that increases enterprise value to $350 million immediately after the repurchase, then what is CC’s new share price? If management knows about the news prior to the repurchase, should they repurchase before or after the news is released?
An analyst's calculation of Bear Corporation's enterprise value is $3.2 billion. Bear has $389 million in cash, $750 million in debt, and 35 million shares outstanding. What is this analyst's valuation of one share of Bear Corp's stock? Enter your answer in dollars and round to the nearest cent. Do not include the dollar sign ($).
You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both of which operate in the same industry and have identical EBITDA of $39.5 million and operating income of $14.5 million. NoEquity, Inc., finances its $50 million in assets with $49 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. NoDebt, Inc., finances its $50 million in assets with no debt and $50 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the net income and return on assets—funders’ investments—for the two firms. (Enter your dollar answers in millions of dollars. Round "Net income" answers to 3 decimal places and "Return on assets" answers to 2 decimal places.) NoEquity. NoDebt Net income million million Return on assets % %