Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 21QAP

a

Summary Introduction

Adequate information:

Market value of debt MVd = $115,000,000

Cost of debt Kd = 6%

Market value of equity MVe = $360,000,000

Cost of equity Ke = 11%

Debt value VD = $45,000,000

Projected EBIT in one year EBITProj = $17,300,000

EBIT growth rate for first 5 years g = 10%

EBIT perpetuity growth rate G = 3%

Net working capital percentage for EBIT WCr = 9%

Capital spending percentage for EBIT CSr = 15%

Depreciation for EBIT Dr = 8%

Shares outstanding SO = 1,950,000

Tax rate t = 21%

To compute: Stock price for the company J.

Introduction: The term Share price refers to the valuation of the stock based on factor considerations such as total debt, enterprise value, shares outstanding, etc.

b

Summary Introduction

Adequate information:

Market value of debt MVd = $115,000,000

Cost of debt Kd = 6%

Market value of equity MVe = $360,000,000

Cost of equity Ke = 11%

Debt value VD = $45,000,000

Projected EBIT in one year EBITProj = $17,300,000

EBIT growth rate for first 5 years g = 10%

EBIT perpetuity growth rate G = 3%

Net working capital percentage for EBIT WCr = 9%

Capital spending percentage for EBIT CSr = 15%

Depreciation for EBIT Dr = 8%

Shares outstanding SO = 1,950,000

Tax rate t = 21%

EV/EBITDA = 9

To compute: Stock price

Introduction: The term Share price refers to the valuation of the stock based on factor considerations such as total debt, enterprise value, shares outstanding, etc.

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