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 9, Problem 19P
a.
Summary Introduction
To determine: The enterprise value.
Introduction:
Enterprises value: The value of a firm which is equal to the present value of the firm’s future cash flow, basically it is the sum of market value of equity and debt, less excess cash.
b.
Summary Introduction
To determine: The expected share price.
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Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:
After that, the free cash flows are expected to grow at the industry average of 4.3% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.3%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $291 million, and 35 million shares outstanding, estimate its share price.
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per
year. Using the discounted free cash flow model and a weighted average cost of capital of 14.7%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $
million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price.
The stock price per share will be $ (Round to the nearest cent.)
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:. Thereafter,
the free cash flows are expected to grow at the industry average of 4.4% per year. Using the discounted free cash flow
model and a weighted average cost of capital of 14.2%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $283 million, and 40 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $ million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of $283 million, and 40 million shares outstanding, estimate its share price.
The stock price per share will be $
(Round to the nearest cent.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year
FCF ($ million)
1
54.8
Print
2
67.6
3
78.6
Done
4
74.6
5
81.2
-
Chapter 9 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 9.1 - How do you calculate the total return of a stock?Ch. 9.1 - Prob. 2CCCh. 9.2 - In what three ways can a firm increase its future...Ch. 9.2 - Under what circumstances can a firm increase its...Ch. 9.3 - How does the growth rate used in the total payout...Ch. 9.3 - Prob. 2CCCh. 9.3 - Prob. 3CCCh. 9.4 - Prob. 1CCCh. 9.4 - What implicit assumptions are made when valuing a...Ch. 9.5 - State the efficient market hypothesis.
Ch. 9.5 - Prob. 2CCCh. 9 - Assume Evco, Inc., has a current price of 50 and...Ch. 9 - Anle corporation has a current price of 20, is...Ch. 9 - Suppose Acap Corporation will pay a dividend of...Ch. 9 - Prob. 4PCh. 9 - NoGrowth Corporation currently pays a dividend of...Ch. 9 - Summit Systems will pay a dividend of 1.50 this...Ch. 9 - Prob. 7PCh. 9 - Canadian-based mining company EI Dorado Gold (EGO)...Ch. 9 - In 2006 and 2007, Kenneth Cole Productions (KCP)...Ch. 9 - DFB, Inc., expects earnings at the end of this...Ch. 9 - Cooperton Mining just announced it will cut its...Ch. 9 - Procter and Gamble (PG) paid an annual dividend of...Ch. 9 - Colgate-Palmolive Company has just paid an annual...Ch. 9 - Prob. 14PCh. 9 - Halliford Corporation expects to have earnings...Ch. 9 - Prob. 16PCh. 9 - Maynard Steel plans to pay a dividend of 3 this...Ch. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Suppose that In January 2006, Kenneth Cole...Ch. 9 - In addition to footwear, Kenneth Cole Productions...Ch. 9 - You read in the paper that Summit Systems from...Ch. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33P
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