Jasper Energy is a growing company with $10 million of debt at a before-tax cost of 6%, and it pays 30% corporate taxes. The firm’s debt-equity ratio is .5 and there are 3 million shares outstanding with a cost of capital of 12%. If the firm expects to have $2 million of free cash flow, and a growth rate of 4%, what is a fair value for the firm’s shares?

Company A just reported free cash flows of $24 million and expects FCF to grow at a constant rate of 5% forever. The company has $100 million in cash, $200 million debt, $50 million preferred stock, and 10 million shares of common stock outstanding. Their cost of debt is 11% and they are located in a country with no corporate taxes. If the expected risk free rate is 2%, the expected return on the S&P 500 is 8%, and their beta is 1.5, what is the price of one share of Company A’s stock today? Give typing answer with explanation and conclusion

12 d out of Your firm has expected profit before interest and taxes of R1 600. Your unlevered cost of capital is 13 per cent and your tax rate is 34 per cent. You have debt with both a book and a face value of R2 500. This debt has an 8 per cent coupon and pays interest annually. What is your weighted average cost of capital?

A5 6e DEF Company is comparing three different capital structures. Plan A is an all-equity plan and would result in 1000 shares of stock. Plan B would result in 700 shares of stock and $13,500 in debt. Plan C would result in 800 shares of stock and $9000 in debt. The firm’s EBIT will be $10,000 per year until infinity. The interest rate on the debt is 12%. e.       Ignoring taxes, what is the break-even EBIT that will cause the EPS on Plan B to be equal to the EPS on Plan C?

4. Toran plc. is an all-equity financed firm and generates earnings of £200 per year. Its current required rate of return on equity is 10% per annum. It is planning to issue corporate debt at a rate of 8% to achieve a debt-equity ratio of 50%. Toran plc. Assume that debt and earnings are perpetuities. What happens to the return on equity after the debt issuance? Assume there are perfect capital markets. 2 % 5 % % ∞o do % 11 %

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