Calculate the value of the firm and the firm equity

Assignment Help Financial Management
Reference no: EM131999398

The MoMi Corporation’s income before interest, depreciation and taxes, was $2.1 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pretax cash flow each year. The tax rate is 30%. Depreciation was $270,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 14% per year, and the firm currently has debt of $4 million outstanding. Use the free cash flow approach to calculate the value of the firm and the firm’s equity. (Enter your answer in dollars not in millions.)  

Value of the firm $

Value of the firm's equity $

Reference no: EM131999398

Questions Cloud

Sources of financing on balance sheet : Spinkbottle, Inc. currently has the following sources of financing on balance sheet. What is value of one such bond if investors require rate of return of 5%
Portfolio expected return and standard deviation : What is his portfolio's expected return and standard deviation?
Dividend growth mean for the share price : A utility company services a growing community. What would an additional 1% dividend growth mean for the share price? What would this mean for the share price?
Zero-coupon corporate bond and municipal green bond : 10-year zero-coupon corporate bond trading at 200 basis point over Treasuries and municipal green bond with 3% coupon trading at 50 basis points over Treasuries
Calculate the value of the firm and the firm equity : Use the free cash flow approach to calculate the value of the firm and the firm’s equity.
Under modern portfolio theory : Under modern portfolio theory, explain whether the robo portfolios are diversified portfolios.
Your understanding of modern portfolio theory : Are there other approaches you may consider in developing an asset’s value? How does this approach impact on your understanding of modern portfolio theory?
Find the nominal interest rate and the lump sum paid : Find the nominal interest rate and the lump sum paid at the end of the loan.
High dividend yields are not always the best investment : Explain why shares with high dividend yields are not always the best investment choice.

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is MPIs times-interest-earned ratio

Its basic earning power (BEP) ratio is 8%, and its return on assets (ROA) is 3%. What is MPI's times-interest-earned (TIE) ratio?

  Some key authors on management theory

You have been introduced to some key authors on management theory including Henri Fayol whose work looked at the duties and roles that managers do and Henry Mintzberg who considered the roles of managers as having more variety and pace.

  How much would the second city bank account be worth

If you made a $536 deposit in each bank, how much more would the Second City Bank account be worth than the First City Bank account at the end of 5 years?

  Determine how much money must be deposited earning

As part of your retirement plan, you want to set up an annuity in which a regular payment of $50,000 is made at the end of each year. You need to determine how much money must be deposited earning 4.5% compounded annually in order to make the annuity..

  Which project would you accept and why

Projects a and b are mutually exclusive. project a costs 10,000 and is expected to generate cash inflows of 5,000 for 4 years. project b costs 10,000 and is expected to generate a single cash flow in year 4 of 23,000. the cost of capital is 12% which..

  Current market price of the bond

Fresh Water, INC. Sold an issue of 23-year $1,000 par value bonds to the public. The bonds have a 9.90% coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, INC bonds 9.17%. What is the current market price o..

  Calculate the sustainable growth rate of the company

Johnson Products earned $3.10 per share last year and it paid out $.75 dividend. The company’s ROE is 16%. Calculate the dividend payout ratio; Calculate the sustainable growth rate of the company.

  Experiencing a period of rapid growth

Snyder Computer Chips, Inc. is experiencing a period of rapid growth. Calculate the value of the stock today.

  What information is generated as part of atm business

What information is generated as part of ATM business processes and how are they employed within the Bank to transact.

  Lowest direct issue costs as percentage of gross proceeds

Which type of offering will generally incur the lowest direct issue costs as a percentage of gross proceeds?

  Representative investors average degree of risk aversion

What is the representative investor’s average degree of risk aversion?

  Repeat the preceding hypothesis test using

For a sample of 400 individuals who filed a tax return between April 10 and 15, the sample mean refund was $910. Based on prior experience a population standard deviation of o=$1600 may be assumed. What is the p-value?

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