Assume that the 90 growth rate is expected to continue

Assignment Help Finance Basics
Reference no: EM13575178

Mexican Motors' market cap is 370 billion pesos. Next year's free cash flow is 10.0 billion pesos. Security analysts are forecasting that free cash will grow by 9.0%per year for the next five years.

a. Assume that the 9.0% growth rate is expected to continue forever. What rate of return are investors expecting?

b.1. Mexican Motors has generally earned about 13% on book equity (ROE = 13%) and reinvested 50% of earnings. The remaining 50% of earnings has gone to free cash flow. Suppose the company maintains the same ROE and investment rate fr the long run. What will be the growth rate of earnings?

b.2. What would be the rate of return?

Reference no: EM13575178

Questions Cloud

The spot rate of the s is 50 and the singapore interest : assume that stevens point co. has net receivables of 100000 singapore dollars in 90 days. the spot rate of the s is
If payback period measures the expected number of years : if payback period measures the expected number of years required to recover the original investment what does
Ring corporation uses a discount rate of 12 and has a tax : ring corporation uses a discount rate of 12 and has a tax rate of 30. the following cash flows occur in the third year
Mike company was authorized to issue 50000 shares of : mike company was authorized to issue 50000 shares of common stock. the company had issued 28000 shares of stock when it
Assume that the 90 growth rate is expected to continue : mexican motors market cap is 370 billion pesos. next years free cash flow is 10.0 billion pesos. security analysts are
Electro inc has a beta of 18 flowers galore has a beta of : electro inc. has a beta of 1.8 flowers galore has a beta of 0.9 the average return in the market is 12 and the
Magic corporation an amusement park is considering a : magic corporation an amusement park is considering a capital investment in a new exhibit. the exhibit would cost 175081
Assume that the oregon ice cream company is considering the : assume that the oregon ice cream company is considering the costs of two of their product lines - ice cream sandwiches
A random sample of the lifetime of 49 ultraillum light : a random sample of the lifetime of 49 ultraillum light bulbs has a mean of 3960 hours and a standard deviation of 200

Reviews

Write a Review

Finance Basics Questions & Answers

  Low-risk retirement account

Explain what will her retirement account be worth at the end of these 35 years - low-risk retirement account

  Objective type questions on issue of dividend

Objective type questions on issue of dividend, which cost are a function of time and not sales and typically contractual

  What is the value of the investment

An investment offers $8,500 per year for 15 years, with the first payment occurring 1 year from now. Assume the required return is 9 percent.

  Your division is considering two investment projects each

your division is considering two investment projects each of which requires an up-front expenditure of 25 million. you

  Normal cost of capital

Myers Business Systems is estimating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given below:

  Print it green inc is a manufacturer of recycled printing

print it green inc. is a manufacturer of recycled printing supplies. the company began operations on 1012008 and is

  What is the net incremental tax cash flow

The firm's marginal tax rate is 34 percent and its required rate of return is 12%. What is the net incremental tax cash flow?

  Question about ratio analysis

Examine each company's financial performance for the two most recent years presented. Your analysis should include at least 8-from the following list, Quick ratio; Current ratio;

  What is the duration of a bond porfolio

What is the duration of a bond porfolio that is equally weighted between three; one with duration 3 years, another with duration 12 years and the third with duration 18 years? Please show work, will rate high.

  Determine your forecast of profit for a store with sales of

a fast-food restaurant owner operates a dozen outlets in california. one menu item is the most popular among others and

  What about triple in value

Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.2 percent and the standard deviation of those stocks in this period was 43.92 percent.

  Gold fields reports all amounts in millions of south

retained earnings relations. the balance sheet of gold fields limited see problem 1.22 for the year ended june 30 2007

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