GEN COMBO LOOSELEAF INVESTMENTS; CONNECT ACCESS CARD
11th Edition
ISBN: 9781260201550
Author: Bodie
Publisher: MCG
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Chapter 11, Problem 20PS
Summary Introduction
To select: The Company that won the lawsuit.
Introduction : The return rate basically measures the loss or gain of the company by comparing the values. It effects by the market index, value of beta, and fluctuations in the prices.
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The prodave paint company earned a net profit margin of 20% on revenues of $20m this year. Fixed Capital Investment was $2 m and depreciation was $3 m. Working capital Investment equals 7.5% of the Sales level in that year. Net income, fixed Capital Investment, depreciation, interest expenses and sales are expected to grow at 10% per year for the next 5 years. After 5 years, the growth in sales , net income, depreciation and interest expenses will decline to a stable 5% per year and fixed Capital Investment and depreciation will offset each other. The tax rate is 40% and the prodave has 1 m shares of common stock outstanding and long term debt paying 12.5% interest trading at it's par value of $32 m. The WACC is 17% during the high growth stage and 15% during the stable growth stage.
Required:
a) Calculate FCFE
b) Determine FCFF
c) Estimate the value of Equity
d) Calculate the value of the Firm
Chapter 11 Solutions
GEN COMBO LOOSELEAF INVESTMENTS; CONNECT ACCESS CARD
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