Majong Inc. forecasts that it will have the free cash flows shown below. The free cash flows are expected to grow by 5% per year after year 3. Year 1 2 3 CF (S million) - 20 48 54 The weighted average cost of capital is 13%. The firm has $55 million of debt and 10 million shares outstanding. What is the firm value today (in $ million)? What is a good estimate of Majong's value per share
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- 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 the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 millionBM expects to pay a dividend of $8 next year and expects these dividends to grow at 3.15% a year. The price of IBM is $67 per share. What is IBM's cost of equity capital?An analyst is trying to estimate the intrinsic value of VN Co. that has a weighted average cost of capital at 10%. The estimated free cash flows for the company for the following years are: · Year 1 P3,000 · Year 2 P4,000 · Year 3 P5,000 The analyst estimates that after three years, free cash flow will grow at a constant annual percentage of 6%. What is the total intrinsic value of the company’s common stock if combined debt and preferred stock has a P25,000 market value? A. 98,556 B. 109,339 C. 78,310 D. 84,339
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