Covan, Inc. is expected to have the following free cash flow: a. Covanhas 6million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10% what should be its stock price? Covanreinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covanat the beginning of year 2, what is its expected price? c. Assume you bought Covanstock at the beginning of year 1. What is your expected return from holding Covanstock until year 2? a. Covan has 6 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ 23.47. (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.) c. Assume you bought Covan Question Viewer ginning of year 1. What is your expected return from holding Covan stock until year 2? Your expected return from holding Covan stock until the beginning of year 2 is %. (Round to two decimal places.)
Covan, Inc. is expected to have the following free cash flow: a. Covanhas 6million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10% what should be its stock price? Covanreinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covanat the beginning of year 2, what is its expected price? c. Assume you bought Covanstock at the beginning of year 1. What is your expected return from holding Covanstock until year 2? a. Covan has 6 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ 23.47. (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.) c. Assume you bought Covan Question Viewer ginning of year 1. What is your expected return from holding Covan stock until year 2? Your expected return from holding Covan stock until the beginning of year 2 is %. (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Covan, Inc. is expected to have the following free cash flow:
a. Covanhas 6million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10% what should be its stock price?
Covanreinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covanat the beginning of year 2, what is its expected price?
c. Assume you bought Covanstock at the beginning of year 1. What is your expected return from holding Covanstock until year 2?
a. Covan has 6 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price?
The current stock price should be $ 23.47. (Round to the nearest cent.)
Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price?
If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.)
c. Assume you bought Covan Question Viewer ginning of year 1. What is your expected return from holding Covan stock until year 2?
Your expected return from holding Covan stock until the beginning of year 2 is %. (Round to two decimal places.)
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