Use the gordon growth model to estimate value of corporation

Assignment Help Financial Management
Reference no: EM13923048

Suppose Whole Foods’ projected free cash flow for next year is FCF = $8.75 billion, and due to expected lower revenues and slower growth sales FCF is expected to grow at a constant rate of only 4.5% into the infinite future. The company’s weighted average cost of capital is 11.5%. Use the Gordon Growth Model to estimate the value of the corporation. Show ALL work

Reference no: EM13923048

Questions Cloud

Prepared to make monthly payments : You’re prepared to make monthly payments of $250, beginning at the end of this month, into an account that pays 10 percent interest compounded monthly. How many payments will you have made when your account balance reaches $65,000?
The firms net capital spending : The December 31, 2009, balance sheet of Schism, Inc., showed long-term debt of $1.375 million, $135,000 in the common stock account and $2.6 million in the additional paid-in surplus account. The firm’s net capital spending for 2010 was $910,000, and..
Afford to make monthly payments : You want to borrow $62,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,300, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?
Retirement plan by considering two investment plans : Assume that you are setting up your retirement plan by considering two investment plans together. (Your retirement in 30 years). You want to earn a total of $1,000,000 after 30 years from the following two investment plans together. You currently hav..
Use the gordon growth model to estimate value of corporation : Suppose Whole Foods’ projected free cash flow for next year is FCF = $8.75 billion, and due to expected lower revenues and slower growth sales FCF is expected to grow at a constant rate of only 4.5% into the infinite future. The company’s weighted av..
What is the maximum initial cost the company : Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.76 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the co..
Use the equivalent annual annuity method : The company is choosing between machine A and B (they are mutually exclusive and the company can only pick one). The initial cost of machine A is $400,000 and it will last for 7 years before it needs to be replaced. Which machine is a better choice f..
What is the net present value of the project : Suppose Palmer Properties is considering investing $2.6 million today (i.e., C0 = -2,600,000) on a new project that is expected to last for 7 years. The project is expected to generate annual cash flows of C1 = -250,000; C2 = 300,000, C3 = 500,000 an..
What is percentage change in price of bond : Both bond A and bond B have 8.4 percent coupons and are priced at par value. Bond A has 7 years to maturity, while bond B has 18 years to maturity. a. If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of bond A an..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the balance of the accumulated depreciation account

The balance in the accumulated depreciation account of Golf Corporation as on April 1st 2011 was Rs 2,00,000 when the original cost of assets was Rs 10,00,000. The company charges 10% depreciation on a straight-line basis. One such asset costing Rs 5..

  What is the value of stock currently paying dividend

What is the value of a stock currently paying a dividend of $1.50 that is growing annually at 8% when investors require a rate of return of 12%?

  Project is estimated to have a net present value equal

A project is estimated to have a net present value equal to $85,000. The risk-adjusted opportunity cost of capital is 15 percent. Which of the following statements is most correct?

  1 eleanor needs 40000 a year to live on in retirement net

1. eleanor needs 40000 a year to live on in retirement net of the income she will receive. she will be retiring in 22

  What is the present value of perpetuity that pays you annual

What is the present value of a perpetuity that pays you annual, end-of-year payments of $950.00? Use a nominal rate (monthly compounding) of 7.50%.

  The bank ships excess vault cash to the federal reserve

Explain how each of the following will affect a bank's deposit balances at the Federal Reserve: a. The bank ships excess vault cash to the Federal Reserve. b. The bank buys U. S. government securities in the open market. c. The bank realizes a surplu..

  Corporations after-tax cost of debt financing

You are asked to estimate Blue Monster Corporation's after-tax cost of debt financing. It can issue 22 years to maturity bonds with a coupon rate of 11.97% paid annually, and par value of $1000. The bonds can be sold now at a price of $1184 each. Mar..

  Calculate the revenue from the groupon campaign

A local dental practice decides to run a Groupon campaign. The campaign offered $365 worth of dental services (such as teeth whitening) for $165. For the total campaign, 235 coupons were sold.

  Develop and describe a strategic measurement

develop and describe a strategic measurement ldquoscorecardrdquo that might be incorporated with the financial measures

  Depreciated on straight-line basis to net book value of zero

Rocky Mountain Chemical Corporation (RMC) is thinking of replacing the packaging machines in its Texas plant. Each packaging machine currently in use has a net book value of $1 million and will continue to be depreciated on a straight-line basis to a..

  Investment is expected to produce annual cash flows

An investment costs $3,500 today. This investment is expected to produce annual cash flows of $1,200, $1,400, $1,300 and $1,100, respectively, over the next four years. What is the internal rate of return on this investment?

  Compute the uncapped and capped payments-loan balances

Fully amortizing, however, negative amortization allowed if payment cap reached. Based on estimated forward rates, the index to which the ARM is tied is focused as follows: Compute the uncapped and capped payments, loan balances, and yield for an ARM..

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