You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million shares outstanding. Your estimate of its cost of capital is 12%. You forecast that the company will generate free cash flows of $150 million and $200 million over the next two years, after which its free cash flows are projected to grow at stable rate in perpetuity. Projected terminal EV/FCFF exit multiple is 10. What is your estimate of its share value? Round to one decimal place.

You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million shares outstanding. Your estimate of its cost of capital is 12%. You forecast that the company will generate free cash flows of $150 million and $200 million over the next two years, after which its free cash flows are projected to grow at stable rate in perpetuity. Projected terminal EV/FCFF exit multiple is 10. What is your estimate of its share value? Round to one decimal place.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Your firm is analyzing a project that will result in aftertax cash savings of $250,000 per year, starting next year. These savings will increase by 3%/year, forever. Your firm has a target debt-to-equity ratio of 0.65. The company's stock is currently trading at $52/share, recently paid a $1.80/share dividend, and dividend payments have been growing at 4.2%/year. The aftertax cost of debt is 5.5% and Tc is 35%. Since this project is less risky than usual, management will apply an adjustment factor of -1.0% to the cost of capital for this project. What is the maximum cost of the project to accept it? 3,852,719.76
Can I get help with....A Security Company produces a cash flow of $210 per year and is expected to continue doing so in the infinite future. The cost of equity capital is 15 percent, and the firm is financed entirely with equity. Management would like to repurchase $100 in shares by borrowing $100 at a 10 percent annual rate (assume that the debt will also be outstanding into the infinite future). Using Modigliani and Miller’s Proposition 1 answer the following questions.What is the value of the firm today? Value of the firm $enter the dollar value of the firm What is the value of equity after the repurchase? Value of the equity $enter the dollar value of the equity What will be the rate of return on common stock required by investors after the stock repurchase? (Round answer to 2 decimal places, e.g. 17.54%.) Rate of return on common stock enter the rate of return on common stock in percentages rounded to 2 decimal places %
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You are considering opening a new plant. The plant will cost $103.2 million upfront. After that, it is expected to produce profits of $30.9 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.6%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. If your cost of capital is 8.6%, the NPV of this investment opportunity is S Should you make the investment? (Select the best choice below.) O A. Yes, because the project will generate cash flows forever. O B. No, because the NPV is not greater than the initial costs. O C. Yes, because the NPV is positive. O D. No, because the NPV is less than zero. million. (Round to one decimal place.) The IRR of the investment is %. (Round to two decimal places.) The maximum deviation allowable in the cost of capital is %. (Round to two…
Gere Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon (terminal) value of operations, in millions at t = 3? Show work in excel
A company has a project with initial investment is $40,000. It will generate $15,000 annually for the next four years. Assume that this company and its project have a beta of 2.0, the risk-free rate of return (i.e., Rm) is 2%6, and the market return (i.e., Rm) is 7%6?. How much is the NPV of this project? [Hint: As discussed, the CAMP model can be used to estimate discount rate (r) in the NPV analysis equation). A) 5,555 B) 3,333 4,444 D) 6,666