Debt and is expected to have free cash flow

Assignment Help Financial Management
Reference no: EM131088069

Heavy Metal Corporation has $2 million in excess cash, $3.5 million in debt and is expected to have free cash flow of $12.5 million next year. Its FCF is then expected to grow at a rate of 2.5% forever. If Heavy Metal’s WACC is 10%, and it has 3.2 million shares outstanding, what should the price of Heavy Metal’s stock be?

Reference no: EM131088069

Questions Cloud

What are arithmetic and geometric returns for stock : A stock has had returns of −19.3 percent, 29.3 percent, 27.6 percent, −10.4 percent, 35.1 percent, and 27.3 percent over the last six years. What are the arithmetic and geometric returns for the stock?
Determine the profit from an index arbitrage : If the stock index is at 148, the three-month futures price is 151, the dividend yield is 5 percent and the interest rate is 8 percent, determine the profit from an index arbitrage if the stock ends up at 144 at expiration. (Ignore transaction costs...
Processes claims for medical flexible spending accounts : Your organization processes claims for medical flexible spending accounts (where employees of an organization pay pre-tax money into an account that can be used to pay medical expenses during the year). Identify at least 5 risks and assess them accor..
Increase in return on sales : Consider each of the following independently: a. Increase in return on sales. b. Increase in cash dividends. c. Increase in the P-E ratio. d. Decrease in the interest coverage ratio. e. Decrease in the accounts receivable turnover. From management's ..
Debt and is expected to have free cash flow : Heavy Metal Corporation has $2 million in excess cash, $3.5 million in debt and is expected to have free cash flow of $12.5 million next year. Its FCF is then expected to grow at a rate of 2.5% forever. If Heavy Metal’s WACC is 10%, and it has 3.2 mi..
Calculate before-tax cost of debt and cost of equity : A firm uses only debt and common stock to finance their operations and maintains a debt-equity ratio of 0.8. Suppose the firm only issues one bond. The information is as follows: the face value of bond is 1,000. Coupon rate is 6%, paid semiannually. ..
Balance sheet net realizable amount of accounts receivable : The Isreal Manners Entertainment Group uses the allowance approach to estimate bad debt expense, as is reqired of all companies with signigicant sales on accounts receivable. What amount will be reported on the 2012 balance sheet as the net realizabl..
Calculate the EAC for each machine : Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,138,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $275,000 per year. Both machines will be..
Estimate the first-year net operating cash flow : Eisenhower Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $15 million Operating costs (excludi..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Expected cash inflows

Project K costs $40,000, its expected cash inflows are $14,000 per year for 10 years, and its WACC is 12%. What is the project's NPV? Round your answer to the nearest cent.

  Art sound systems targeted at young professional market

HRM manufactures state of the art sound systems targeted at the young professional market. Analysts following HRM Corporation predict that the company’s earnings and dividends will continue to grow at 14 percent for the next period. What is the value..

  Reduce production-marketing costs for entry-level cameras

Which one of the following is NOT an attractive way to reduce production and/or marketing costs for entry-level cameras and strive to achieve a competitive advantage over rivals based on lower overall costs per entry-level camera sold?

  They have to save each year to reach their goal

Assume that your parents wanted to have $160,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 11.5% per year on their investments. How much wo..

  The correlation between the two stocks

Consider two stocks, Stock D, with an expected return of 20 percent and a standard deviation of 36 percent, and Stock I, an international company, with an expected return of 6 percent and a standard deviation of 16 percent. The correlation between th..

  Common stock-preferred stock and debt

Information on Janicek Power Co., is shown below. Assume the company’s tax rate is 38 percent. Debt: 9,800 9.3 percent coupon bonds outstanding, $1,000 par value, 22 years to maturity, selling for 97.5 percent of par; the bonds make semiannual paymen..

  Discuss the stock price performance of the holding company

Discuss the stock price performance of the holding company of the bank during the past three years. Remember the holding company may have other assets than the bank. But for almost all BHCs the bank is the largest asset.

  Manages endowments and trusts for large clients

Gordon Powles works for Creighton Capital Management and manages endowments and trusts for large clients. The fund invests most of its portfolio in S&P 500 stocks, keeping some cash to facilitate purchases and withdrawals. A colleague of Powles, Mari..

  What is the degree of operating leverage

Given the following information, what is the degree of operating leverage? Price = $20 per unit; variable cost = $6 per unit; fixed costs = $5,000 per year; depreciation = $8,000 per year; sales = 2,000 units per year. Tax rate = 34%.

  Suppose the business fails

Suppose you invest $20,000 of your own money in a business as a sole proprietor, and then borrow an additional $10,000. Suppose the business fails. Which of the following describes your situation, and what is your total loss?

  Estimates of current interest rate premiums

Real Risk-Free Rate You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.6%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:

  Should speculators use currency futures or options

Discuss the following topic- "Should speculators use currency futures or options" - Options enable speculators to select the degree of downside risk that they are willing to tolerate.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd