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You have been asked to estimate the value of General Communications, a telecomm firm. General Communications has a debt to capital ratio of 30%, a beta of 1.10 and a pre-tax cost of debt of 7.5%. The firm had earnings before interest and taxes of $ 600 million in 1998, after depreciation charges of $ 300 million. The firm had capital expenditures of $ 370 million, and non-cash working capital increased by $ 50 million during 1998. The firm also had a book value of capital of $ 2 billion at the beginning of 1998. (The treasury bond rate is 5%, the market risk premium is 6.3% and the firm has a tax rate of 40%). Assuming that the firm is in stable growth, and that the return on capital and reinvestment rates from 1998 can be sustained forever, estimate the value of the firm.
On July 1 of the current year, Melissa Co. acquired 25% of the outstanding shares of common stock of International Co. at a total cost of $700,000. The underlying equity (net assets) of the stock acquired by Melissa was only $600,000. Compute the tot..
You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel. What is the initial outlay associated with this project? What are the annual free cash flows associated with this..
The total book value of the firm’s equity is $16 million; book value per share is $32. The stock sells for a price of $35 per share, and the cost of equity is 13%. The firm’s bonds have a face value of $4 million and sell at a price of 140% of face v..
You have just received notification that you have won the $2.13 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 67 years from now. What is the present value..
The firm manufactures a global positioning system (GPS) that sells for $2,000, with cost of goods sold (hardware 30% and software 70%) of 55% of sales. What is the new cost of goods sold percent of sales for each of the countries
A $200,000, 30 year, monthly payment mortgage has in interest rate of 4.5% plus two points. What is the lender’s yield if the loan is amortized over the full 30 years?
Pace Corporation had a taxable income of $300,000 in 2007. Which of the following expression may be used to compute the federal income tax liability for the company?
The Internal Rate of Return for capital budgeting projects is best described as:
Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $.46 and lasts for 1,000 hours. If you require a 11 percent return, at what cost per kilow..
A five-year project has an initial fixed asset investment of $265,000, an initial NWC investment of $21,000, and an annual OCF of −$20,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Juggernaut Satellite Corporation earned $21 million for the fiscal year ending yesterday. The firm also paid out 25 percent of its earnings as dividends yesterday. The firm will continue to pay out 25 percent of its earnings as annual, end-of-year di..
Calculate the price that you would be willing to pay for a constant growth stock that has the following characteristics: (a) Annual Dividend: $1.23, (b) Constant Growth Rate: 5.6%, and (c) Investor’s required rate of return: 6.5%.
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