Given the forecast below, estimate the fair market value per share of Kenmore Air's equity at the end of 2017 if thecompany has 50 million shares outstanding and the market value of its interest-bearing liabilities on the valuation dateequals $300 million. Assume that after 2021, earnings before interest and tax will remain constant at $220 million,depreciation will equal capital expenditures in each year, and working capital will not change. Kenmore Air's weighted-average cost of capital is 11 percent and its tax rate is 40 percent.Forecast for Kenmore Air, Inc.Year2018 2019 2020 2021-408597112Free cash flow ($ millions)

Fair Market Value per Shares: In the case of a private company's common stock, the fair market value…

Answered: Given the forecast below, estimate the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Halliford Corporation expects to have earnings this coming year of $2.94 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 53% of its earnings. It will then retain 17% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 24.43% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 8.4%, what price would you estimate for Halliford stock? Note: Remenber that growth rate is computed as: retention rate x rate of return.
In 2021, the company has a plan to raise 1,500 billion VND to expand the operation. The company is considering two scenarios (1) issue 150,000,000 common stocks with the par value of 10,000 VND; (2) issue bonds with a 10 percent annual coupon. Assume that current interest expense is unchanged from 2020. They expect annual EBIT to increase by 1060 billion VND. Corporate tax rate of 20 percent. EBIT 2020 = 936 billion VND Interest = 88 billion VND No. of share outstanding 541 million 3.1. Calculate the EPS of each scenario. 3.2.Calculate the EBIT-EPS indifference point and draw a graph of the EBIT-EPS indifference point. If the company’s goal is to maximize its EPS, which is financing scenario chosen? Why?
Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 million
Halliford Corporation expects to have earnings this coming year of $3.18 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 50% of its earnings. It will then retain 17% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 21.81% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 8.3%, what price would you estimate for Halliford stock? Note: Remenber that growth rate is computed as: retention rate×rate of return.
Nikul
Data are as follows: In year 2020, sales are 150,000 units with Selling price per unit of 10 and VC per unit iof 6.50 per unit. Fixed cost is 155,000 and Interest cost is 90,000. Q3. Assume that the company expects to have sales increase by 20%, what will be the resulting change in EBIT in year 2021?(2 Points) • 28.38% • 33.33% • 25% • 26.45%
Puckett Products is planning for $3 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.
Puckett Products is planning for $4 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $3 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.
Prescott Pharmaceuticals will pay an annual dividend of $0.98 one year from now at t=1. Analysts expect this dividend to grow at 17.5% per year thereafter until the end of year 2020. Dividends are then expected to be stable until t=34. Afterwards, dividends decline at a rate of 3.0% annually (the dividend at t=35 is 3.0% smaller than the payment at t=34) and are paid in perpetuity. a) According to the dividend-discount model, what is the value of a Prescott Pharmaceuticals share if the firm's cost of equity capital is 12.2%?. The value of per share is $$.(Round your answer to the nearest cent)
Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1-T)] will be $400 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $120 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 5.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.1%; the market value of the company's debt is $2.85 billion; and the company has 190 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects. Also, the firm has zero non-operating assets. Using the corporate valuation model, what should be the company's stock price today (December 31, 2019)? Do not round intermediate…
Halliford Corporation expects to have earnings this coming year of $2.73 per share. Halliford plans to retain all of its earnings for the next two years. Then, for the subsequent two years, the firm will retain 45% of its earnings. It will retain 21% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 18.1% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford's share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford's equity cost of capital is 10.3%, what price would you estimate for Halliford stock? The stock price will be $ (Roun to the nearest cent.)
GlobalShippers Inc. has forecasted earnings of $1,233,600, $1,345,900, and $1,455,650 for the next three years. What is the future value of these earnings if the firm's opportunity cost is 13 percent? (Round to the nearest dollar) $4,362,428 $4,214,360 4,551,701 $3,900,865

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