What is the market price per share of stock

Assignment Help Financial Management

Reference no: EM131178077

Say you decide to start a firm and you need $500 million of capital to begin. You sell stock for its par value, a total of one million shares (par value is $200 per share), and sell $300 million of bonds at par value. You use the capital you just raised to buy $500 million of equipment. Assume that the average cost of capital = 12%. In the first year of operation, EBIT = $105 million, tax rate 40% and the required rate of return on equity is 22%. Assume that the market expects that the firm will continue to grow its Economic Profit at a rate of 6% annually, what is the market price per share of stock?

Reference no: EM131178077

Questions Cloud

What is the NAV of the fund : A mutual fund has 600 shares of General Electric, currently trading at $18, and 600 shares of Microsoft, Inc., currently trading at $35. The fund has 1,500 shares outstanding. What is the NAV of the fund? Assume that the price of General Electric sh..

Diluted earnings per share : Vickrey Technology has had net income of $1,500,000 in the current fiscal year. There are 1,000,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $8 million. The $8 million is represented by 5,000 d..

What is its projected available funds gap : Time bank of New York expects new deposit inflows next month of $265 million and deposit with straws of $425 million. The banks economics department has projected that new loan demand will reach $400 million and customers with approved credit lines w..

Why mega merger often ended up in financial disaster : On Jan 10th 2000, AOL announced to acquire Time Warner for $182 billion. When the deal was announced, the combined company is worth $350 billion. Now split again, AOL is worth $3 billion while Time Warner is worth about $140 billion 15 years later. P..

What is the market price per share of stock : Say you decide to start a firm and you need $500 million of capital to begin. You sell stock for its par value, a total of one million shares (par value is $200 per share), and sell $300 million of bonds at par value. You use the capital you just rai..

Upon completion of capital investment project : Upon completion of a capital investment project, what management functions related to it remain to be done? Define and discuss the two main types of cost accounting systems for manufacturing operations. What are their similarities and differences?

How about if the bond is priced to yield : Suppose that you purchase a $5000 coupon bond with an annual coupon of 8% and a maturity of 5 years. A) If the bond is sold at Par Value (that is to yield the coupon rate) what does it cost? B) How about if the bond is priced to yield 9%, will it cos..

Considering opening new manufacturing plant : A regional soft drink manufacturer is considering opening a new manufacturing plant in the Midwest. Its total fixed costs are $100 million, with the cost of the new plant included in that figure at a depreciated value based on the expected life of th..

What is the current market price of bonds : Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 11.75 percent coupon rate and pain interest annually. It is now 7 years later. The current market rate of interest on the Bright Sun bonds is 10.18 percen..

User Account

All Pages