EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 19, Problem 15P
Approximately what expected future long-run growth rate would provide the same EBITDA multiple in 2010 as Ideko has today (i.e., 9.1)? Assume that the future debt-to-value ratio is held constant at 40%; the debt cost of capital is 6.8%; Ideko’s market share will increase by 0.5% per year until 2010; investment, financing, and
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Consider the table given below to answer the following question. The long-run growth rate is projected at 5% and discount rate is 10%.
Year
Asset value
Earnings
Net investment
Free cash flow (FCF)
Return on equity (ROE)
Asset growth rate
Earnings growth rate
1
2
3
4
5
6
7
8
15.00 16.65 18.48 20.51 22.16 23.93 25.84 27.13
1.65 1.83
1.65 1.83
Present value
0.11
0.11
9
10
28.49 29.92
2.03 2.26 2.44 2.51 2.58 2.58 1.99 2.09
2.03 1.64 1.77 1.91 1.29 1.36 1.42 1.50
0.62 0.66 0.60 1.29 1.22 0.57 0.60
0.11 0.11 0.11 0.11 0.105 0.10 0.095 0.07
0.11 0.11 0.08 0.08 0.08 0.05 0.05 0.05 0.05
0.11 0.11 0.11 0.08 0.03 0.03 0.00 -0.23 0.05
0.07
Assuming that competition drives down profitability (on existing assets as well as new investment) to 10.5% in year 6, 10% in year 7,
9.5% in year 8, and 7% in year 9 and all later years. What is the value of the concatenator business? (Do not round intermediate
calculations. Enter your answer in millions rounded to 2 decimal places.)
million
Suppose in 2023 the expected dividends of Fordson, Inc. stock will equal $260M with a discount rate of 8% and an expected growth rate for the dividends of 6%. Assuming constant growth rate, if interest increases to 9%, will the val of the company increase or decrease and by how much?
Given that the NPV per share of the reinvestment of the retained earnings next year for a firm is $2.50.
Assuming the growth of the NPV is constant at 5% each year, with the required return rate of 12%, what is the
estimated Present Value of Growth Opportunity (PVGO)?
a. $35.71
b. $59.23
c. $46.75
d. $24.56
Chapter 19 Solutions
EBK CORPORATE FINANCE
Ch. 19.1 - Prob. 1CCCh. 19.1 - Prob. 2CCCh. 19.2 - Prob. 1CCCh. 19.2 - Prob. 2CCCh. 19.3 - What is a pro forma income statement?Ch. 19.3 - Prob. 2CCCh. 19.4 - Prob. 1CCCh. 19.4 - Prob. 2CCCh. 19.5 - Prob. 1CCCh. 19.5 - Prob. 2CC
Ch. 19.6 - Prob. 1CCCh. 19.6 - Prob. 2CCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Under the assumptions that Idekos market share...Ch. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 11PCh. 19 - Calculate Idekos unlevered cost of capital when...Ch. 19 - Using the information produced in the income...Ch. 19 - How does the assumption on future improvements in...Ch. 19 - Approximately what expected future long-run growth...Ch. 19 - Prob. 16P
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