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Watkins, Inc. has never paid a dividend, and when it might begin paying dividends is unkown. Its current current free cash flow is $100,000 and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital is WACC = 11%. Watkins currently holds $325,000 of non-operating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. Watkins has 50,000 shares of common stock outstanding.
Calculate the value of its common stock
Calculate the per share stock price.
A law firm uses activity-based pricing. The company’s activity pools are as follows: Cost Pool Annual Estimated Cost Cost Driver Annual Driver Quantity Consultation 197,000 Number of consultations 100 consultations Administrative Costs 130,000 Admin ..
What is the net present value of a project if the required rate of return is 12 percent? The cash flows, in order, are -$42,398 (initial cost), $13,407 (year 1 CF), $21,219 (year 2 CF) and $17,800 (year 3 CF).
Draw the price-ytm(i) graph for a 5% fixed-coupon bond that has 10 years to maturity (assuming annual coupon payments). Calculate the duration for this bond if the interest rate is 3%. What is the approximate percentage change in price if the interes..
You are considering the purchase of crown bakery inc. Common stock that just paid a dividend of $20 per share. You expect the dividend to grow at a rate of 5.28 % per year, indefinitely. You estimate that a required rate of return of 12.25 percent wi..
In the summer of 2000, United Airlines (UAL) pilots refused to work overtime hours, stranding millions of passengers all over the United States. The pilots took this action in part to protest against unfavourable labor conditions. UAL stock price suf..
Analyse the value of Caraway's equity if it pays out a $200,000 cash dividend today and plans to pay a $1.2 million liquidating dividend at the end of one year.
CalJuice Company has decided to introduce three fruite juices made from blending two or more concentrates. These juices will be packaged in 2-qt (64-oz) cartons. One carton of pineapple-orange juice requires 8 oz each of pineapple and orange juice co..
Shady Rack Inc. has a bond outstanding with 10 percent coupon, paid semiannually, and 15 years to maturity. The market price of the bond is $1,039.55. Calculate the bond’s yield to maturity (YTM). Now, if due to changes in market conditions, the mark..
Investment A has the following cash flows: 200,200,300,200 200 Investment B has the following cash flows: 300,300,300,300,300 Both investments have a cost of 350 initially. Indicate which registers, financial or cash flow, can be used to determine th..
A firm has a return on equity of 21 percent. The total asset turnover is 2.9 and the profit margin is 8 percent. The total equity is $8,000. What is the amount of the net income?
Jamestown Ltd. currently produces boat sails and is considering expanding its operations to include awnings for homes and travel trailers. The company owns land beside its current manufacturing facility that could be used for the expansion. This equi..
Bond X is no callable and has 20 years to maturity, a 11% annual coupon, and a $1,000 par value. Your required return on Bond X is 9%; and if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5, years the yie..
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