Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Related questions
Question
Scarab Technologies is expected to generate $175 million in
How much is each share of common stock is worth dollars, according to the corporate valuation model?
Expert Solution
arrow_forward
Step 1
Free cash flow next year = 175 million
Growth rate = 7%
WACC=10%
Share outstanding = 45million
arrow_forward
Step 2
Value of operations = Free cash flows1÷( Capitalization Rate- growth rate )
= $175 million /(10%-7%)
=$175 million /(.03)
= $5833.3333
Step by stepSolved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Scampini Technologies is expected to generate $100 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 14%, and it has zero nonoperating assets. If Scampini has 55 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is wortharrow_forwardYou are bullish on Telecom stock. The current market price is $110 per share, and you have $22,000 of your own to invest. You borrow an additional $22,000 from your broker at an interest rate of 6.6% per year and invest $44,000 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 8% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.) b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediate ly. (Round your answer to 2 decimal places.)arrow_forwardjenny Banks is interested in buying the stock of Fervan, Inc., which is increasing its dividends at a constant rate of 8.0 percent. Last year the firm paid a dividend of $2.65. The required rate of return is 18.5 percent. What is the current value of this stock? (Do not round intermediate calculations. Round answer to 2 decimal places, e.g. 15.25.) Current value $ What should be the price of the stock in year 5? (Do not round intermediate calculations. Round answer to 2 decimal places, e.g. 15.25.) Price of stock $arrow_forward
- Hubbard Industries just paid a common dividend, D0, of $1.60. It expects to grow at a constant rate of 3% per year. If investors require a 9% return on equity, what is the current price of Hubbard's common stock? Do not round intermediate calculations. Round your answer to the nearest cent.arrow_forwardSims Manufacturing is expected to generate $195 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Sims has no debt or preferred stock, and its required rate of return is 12%. If Sims has 45 million shares of common stock outstanding, what is the stock's value per share? (Answer to the nearest cent. i.e. one thousand dollars would be entered 1000.00).arrow_forwardNew Gadgets, Incorporated, currently pays no dividend but is expected to pay its first annual dividend of $4.90 per share exactly 7 years from today. After that, the dividends are expected to grow at 3.5 percent forever. If the required return is 11.3 percent, what is the price of the stock today?arrow_forward
- Bretton, Inc., just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year, indefinitely. Investors require a return of 13 percent on the stock for the first three years, a rate of return of 11 percent for the next three years, and then a return of 9 percent thereafter. What is the current share price for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share pricearrow_forwardIf you require a return of 12 percent on this stock, what will you pay for a share today?arrow_forwardGentleman Gym just paid its annual dividend of $2.5 per share, and it is widely expected that the dividend will increase by 4 percent per year indefinitely. What price should the stock sell at? Assume the discount rate is 20 percent. How would your answer change if the discount rate were only 15 percent? Why does the answer change?arrow_forward
- Quinoa Farms just paid a dividend of $3.10 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 13 percent for the first three years, a return of 11 percent for the next three years, and a return of 9 percent thereafter. What is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share pricearrow_forwardImpossible Corporation just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Give typing answer with explanation and conclusionarrow_forwardScampini Technologies is expected to generate $100 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 11%. If Scampini has 50 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth $ , according to the corporate valuation model.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education