Adequate information: Market value of debt MV d = $115,000,000 Cost of debt K d = 6% Market value of equity MV e = $360,000,000 Cost of equity K e = 11% Debt value V D = $45,000,000 Projected EBIT in one year EBIT Proj = $17,300,000 EBIT growth rate for first 5 years g = 10% EBIT perpetuity growth rate G = 3% Net working capital percentage for EBIT WC r = 9% Capital spending percentage for EBIT CS r = 15% Depreciation for EBIT D r = 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.

Question

Want to see the full answer?

Answer 1

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

D. (1) Consider the following cash inflows of a financial product. Given that the market interest rate is 12%, what price would you pay for these cash flows? Year 0 1 2 3 4 Cash Flow 160 170 180 230

Explain why financial institutions generally engage in foreign exchange tradingactivities. Provide specific purposes or motivations behind such activities.

A. In 2008, during the global financial crisis, Lehman Brothers, one of the largest investment banks, collapsed and defaulted on its corporate bonds, causing significant losses for bondholders. This event highlighted several risks that investors in corporate bonds might face. What are the key risks an investor would encounter when investing in corporate bonds? Explain these risks with examples or academic references. [15 Marks]

Answer 2

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

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.

Answer 6

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.

Answer 7

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.

Answer 8

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.

Answer 9

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.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 13 - Project Risk If you can borrow all the money you...Ch. 13 - WACC and Taxes Why do we use an aftertax figure...Ch. 13 - SML Cost or Equity Estimation If you use the stock...Ch. 13 - SML Cost or Equity Estimation What are the...Ch. 13 - Prob. 5CQ Ch. 13 - Cost of Capital Suppose Tom OBedlam, president of...Ch. 13 - Company Risk versus Project Risk Both Dow Chemical...Ch. 13 - Prob. 8CQ Ch. 13 - Leverage Consider a levered firms projects that...Ch. 13 - Beta What factors determine the beta of a stock?...

Solution Summary: The author explains that the stock price is based on factors such as total debt, enterprise value, shares outstanding, etc.

Want to see the full answer?

Chapter 13 Solutions