Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock. The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%. To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

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Answer 1

Question

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

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In comparison to free cash flow valuation, what's the main issue with dividend valuation?

Explain how to estimate the price per share using the free cashflow valuation model.

Why dividen yield ratio increase while dividend payout ratio decrease? please explain in terms of investment . iS IT WORTH TO INVEST IN?

Answer 2

Question

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

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Answer 3

Question

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

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Answer 4

Question

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

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Answer 5

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

Answer 6

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

Answer 7

Chapter 7, Problem 20MC

Summary Introduction

Case summary:

Employer of person X is considering an expansion into a similar filed which includes acquisition of Company T. He is also considering purchasing Company BM each with 5 million shares of stock.

The company has free cash flow of 24 million which is expected to grow at 5%. It also has debt of $200 million, preferred stock of $50 million, and short-term investment of $100million. WACC of 11%.

To illustrate: The advantage of free cash flow valuation model relative to the dividend growth model.

Answer 8

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Answer 9

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Answer 11

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Solution Summary: The author illustrates the advantages of free cash flow valuation model relative to the dividend growth model.

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