CNCT ACC CORPORATE FINANCE
CNCT ACC CORPORATE FINANCE
12th Edition
ISBN: 9781264604081
Author: Ross
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 9, Problem 10QAP
Summary Introduction

To calculate: Stock price, and the stock price if the benchmark PE was 21 .

Introduction: The price at which a share of stock is currently trading on the market is referred to as the stock price.

PE ratio is the ratio to the value of a firm that compares its market price/current share price to its earnings per share (EPS). PE ratio is the price-to-earnings ratio.

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Estefan Industies has a new project available that requires an initial investment of sex million. The project will provide unlevered cash flows of $925,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of 35. The company's bonds have a YTM of 5.9 percent. The companies with operations comparable to this project have unlevered betas of 1.09, 1.17, 1.28, and 1.20. The risk-free rate is 3.6 percent, and the market risk premium is 7 percent. The tax rate is 21 percent. What is the NPV of this project?

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CNCT ACC CORPORATE FINANCE

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