Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1 T)] will be $450 million and its 2020 depreciation expense will be $70 million. Barrington's 2020 gross capital expenditures are expected to be $100 million and the change in its net operating working capital for 2020 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 6% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.9%; the market value of the company's debt is $2.6 billion; and the company has 170 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 calculations. Round your answer to the nearest cent. $ per share

Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1 T)] will be $450 million and its 2020 depreciation expense will be $70 million. Barrington's 2020 gross capital expenditures are expected to be $100 million and the change in its net operating working capital for 2020 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 6% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.9%; the market value of the company's debt is $2.6 billion; and the company has 170 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 calculations. Round your answer to the nearest cent. $ per share

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 7P: Current and projected free cash flows for Radell Global Operations are shown here. Growth is...

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Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1 – T)] will be $450 million and its 2020 depreciation expense will be $70 million. Barrington's 2020 gross capital expenditures are expected to be $100 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% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 9%; the market value of the company's debt is $2.15 billion; and the company has 180 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…
Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1 – T)] will be $410 million and its 2020 depreciation expense will be $70 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 $30 million. The firm's free cash flow is expected to grow at a constant rate of 4.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.5%; the market value of the company's debt is $2.15 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…
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Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating income [EBIT(1 – T)] will be $420 million and its 2020 depreciation expense will be $70 million. Barrington's 2020 gross capital expenditures are expected to be $100 million and the change in its net operating working capital for 2020 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.8%; the market value of the company's debt is $2.15 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 calculations. Round your…
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