Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 9, Problem 28QAP
Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of
a. What is your estimate of the current stock price?
b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 11. What is your new estimate of the company’s stock price?
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Full Boat Manufacturing has projected sales of $124.5 million next year. Costs are expected to be $74.4 million and net investment is expected to be $15.05 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6.6 million shares of stock outstanding and investors require a return of 13 percent return on the company’s stock. The corporate tax rate is 24 percent.
a.
What is your estimate of the current stock price?
b.
Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 11. What is your new estimate of the company’s stock price?
7
Full Boat Manufacturing has projected sales of $123.5 million next year. Costs are expected to be $73.6 million and net investment is expected to be $14.75 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 6.4 million shares of stock outstanding and investors require a return of 11 percent return on the company’s stock. The corporate tax rate is 22 percent. What is your estimate of the current stock price? A. 89.39 B. 88.53 C. 93.98 D. 85.33
Stock Valuation and Cash Flows Full Boat Manufacturing has projected sales of $115
million next year. Costs are expected to be $67 million and net investment is expected to
be $12 million. Each of these values is expected to grow at 14 percent the following year,
with the growth rate declining by 2 percent per year until the growth rate reaches 6 per-
cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock
outstanding and investors require a return of 13 percent on the company's stock. The
corporate tax rate is 21 percent.
a. What is your estimate of the current stock price?
b. Suppose instead that you estimate the terminal value of the company using a PE mul-
tiple. The industry PE multiple is 11. What is your new estimate of the company's
stock price?
Chapter 9 Solutions
Corporate Finance
Ch. 9 - Stock Valuation Why does the value of a share of...Ch. 9 - Stock Valuation A substantial percentage of the...Ch. 9 - Dividend Policy Referring to the previous...Ch. 9 - Prob. 4CQCh. 9 - Common versus Preferred Stock Suppose a company...Ch. 9 - Dividend Growth Model Based on the dividend growth...Ch. 9 - Growth Rate In the context of the dividend growth...Ch. 9 - Price-Earnings Ratio What are the three factors...Ch. 9 - Prob. 9CQCh. 9 - Prob. 10CQ
Ch. 9 - Prob. 1QAPCh. 9 - Stock Values The next dividend payment by Skippy,...Ch. 9 - Prob. 3QAPCh. 9 - Stock Values Saine Corporation will pay a 3.25 per...Ch. 9 - Stock Valuation Change, Inc., is expected to...Ch. 9 - Stock Valuation Suppose you know that a companys...Ch. 9 - Prob. 7QAPCh. 9 - Prob. 8QAPCh. 9 - Growth Rate The newspaper reported last week that...Ch. 9 - Prob. 10QAPCh. 9 - Prob. 11QAPCh. 9 - Prob. 12QAPCh. 9 - Prob. 13QAPCh. 9 - Prob. 14QAPCh. 9 - Prob. 15QAPCh. 9 - Prob. 16QAPCh. 9 - Prob. 17QAPCh. 9 - Prob. 18QAPCh. 9 - Valuing Preferred Stock Fifth National Bank just...Ch. 9 - Prob. 20QAPCh. 9 - Nonconstant Growth and Quarterly Dividends...Ch. 9 - Finding the Dividend Newkirk, Inc., is expected to...Ch. 9 - Prob. 23QAPCh. 9 - Prob. 24QAPCh. 9 - Price-Earnings Ratio Consider Pacific Energy...Ch. 9 - Prob. 26QAPCh. 9 - Stock Valuation and EV FFDP Corp. has yearly sales...Ch. 9 - Stock Valuation and Cash Flows Full Boat...Ch. 9 - Prob. 29QAPCh. 9 - Prob. 30QAPCh. 9 - Nonconstant Growth Storico Co. just paid a...Ch. 9 - Prob. 32QAPCh. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - Prob. 4MCCh. 9 - Prob. 5MCCh. 9 - Prob. 6MC
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