Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 19, Problem 15P
Approximately what expected future long-run growth rate would provide the same EBITDA multiple in 2010 as Ideko has today (i.e., 9.1)? Assume that the future debt-to-value ratio is held constant at 40%; the debt cost of capital is 6.8%; Ideko’s market share will increase by 0.5% per year until 2010; investment, financing, and
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Suppose that in 2021, there are three possible growth rates for the US economy: 8%, 6%, and 4%. Suppose that the three scenarios are equally likely to occur. Further assume that the return on the stock market during the year will be 20%, 10%, and 0% respectively in these three scenarios, and the return on the 10-year T-bond will be -1%, 2%, and 5% in these three scenarios. What are the standard deviations of stocks' and bonds' returns in 2021? What is the correlation coefficient between stocks' and bonds' returns?
Consider the table given below to answer the following question. The long-run growth rate is projected at 5% and discount rate is 10%.
Year
Asset value
Earnings
Net investment
Free cash flow (FCF)
Return on equity (ROE)
Asset growth rate
Earnings growth rate
1
2
3
4
5
6
7
8
15.00 16.65 18.48 20.51 22.16 23.93 25.84 27.13
1.65 1.83
1.65 1.83
Present value
0.11
0.11
9
10
28.49 29.92
2.03 2.26 2.44 2.51 2.58 2.58 1.99 2.09
2.03 1.64 1.77 1.91 1.29 1.36 1.42 1.50
0.62 0.66 0.60 1.29 1.22 0.57 0.60
0.11 0.11 0.11 0.11 0.105 0.10 0.095 0.07
0.11 0.11 0.08 0.08 0.08 0.05 0.05 0.05 0.05
0.11 0.11 0.11 0.08 0.03 0.03 0.00 -0.23 0.05
0.07
Assuming that competition drives down profitability (on existing assets as well as new investment) to 10.5% in year 6, 10% in year 7,
9.5% in year 8, and 7% in year 9 and all later years. What is the value of the concatenator business? (Do not round intermediate
calculations. Enter your answer in millions rounded to 2 decimal places.)
million
Suppose in 2023 the expected dividends of Fordson, Inc. stock will equal $260M with a discount rate of 8% and an expected growth rate for the dividends of 6%. Assuming constant growth rate, if interest increases to 9%, will the val of the company increase or decrease and by how much?
Chapter 19 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 19.1 - Prob. 1CCCh. 19.1 - Prob. 2CCCh. 19.2 - Prob. 1CCCh. 19.2 - Prob. 2CCCh. 19.3 - What is a pro forma income statement?Ch. 19.3 - Prob. 2CCCh. 19.4 - Prob. 1CCCh. 19.4 - Prob. 2CCCh. 19.5 - Prob. 1CCCh. 19.5 - Prob. 2CC
Ch. 19.6 - Prob. 1CCCh. 19.6 - Prob. 2CCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Under the assumptions that Idekos market share...Ch. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 11PCh. 19 - Calculate Idekos unlevered cost of capital when...Ch. 19 - Using the information produced in the income...Ch. 19 - How does the assumption on future improvements in...Ch. 19 - Approximately what expected future long-run growth...Ch. 19 - Prob. 16P
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- Consider the table given below to answer the following question. The long-run growth rate is projected at 5% and discount rate is 10%. Year Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth ratei Earnings growth rate 1 2 4 5 6 7 8 10 28.49 29.92 15.00 16.65 18.48 20.51 22.16 23.93 25.84 27.13 1.65 1.83 2.03 1.65 1.83 2.03 1.99 2.09 1,42 1.50 2.26 2.44 2.51 2.58 2.58 1.64 1.77 1.91 1.29 1.36 0.62 9.66 0.60 1.29 1.22 0.11 0.11 0.11 0.11 0.11 0.105 0.10 0.095 0.11 0.11 0.11 0.08 0.08 0.00 0.05 0.05 0.05 0.11 0.11 0.11 0.08 0.57 0.60 0.07 9.07 0.05 0.03 0.03 0.00 -0.23 0.05 Assuming that competition drives down profitability (on existing assets as well as new investment) to 10.5% in year 6, 10% in year 7. 9.5% in year 8, and 7% in year 9 and all later years. What is the value of the concatenator business? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value millionarrow_forwardAssume that a firmʹs earnings are expected to be $11 million next year and that this number is expected to grow by 3.5% a year indefinitely. If the appropriate cost of capital is 11%, what is this firmʹs P/E ratio? 10.1 13.3 2.3 14.5arrow_forwardKimbi Limited had the following items on its balance sheet at the beginning of the year: Assets Cash Property Plant & Equipment Liabilities and equity $50,000 Debt $ 350,000 Equity $ 100, 000 $ 300,000 The net profit this year is $20, 000 with a dividend of $5, 750.arrow_forward
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