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CORPORATE VALUATION
You are an analyst on Wall Street and have been assigned Suzy Q industries. However SQ is still growing and doesn't pay dividends, nor have any plans to do so in the future. Therefore, you have decided to utilize the Corporate Valuation model to assess the value of the firm and ultimately determine a feasible stock valuation. You have already estimated their Free Cash Flows for the next four years as $3 million, $6 million, $10 million, and 15 million respectively. After four years, you anticipate SQ matures with a constant 7% growth rate. The firms WACC is 12%. The market value of their debt and preferred stock is $60 million, and it has 10 million shares of common stock outstanding. What is the value of SQ? What would you determine their stock price to be utilizing this method? (Hint: calculate the value of the firm once it achieves constant growth. Then discount FCF's and value to obtain a current value.)
Sailor Sam needs to have $15,000 at the end of 5 years to fulfill his dream of buying a small sailboat. He is willing to invest the funds as a single amount.
A company can buy an option for the delivery of 1 million units of a commodity. In 3 years at $25/unit. The three year futures price is $24. Interest rates are 5% and futures volatility is 20%. How much is the option worth?
1. describe a call option on interest rate futures. how does it differ from purchasing a futures contract?2. describe a
Carnes Cosmetics Co.'s stock price is $40.57, and it recently paid a $1.50 dividend. This dividend is expected to grow by 28% for the next 3 years
Vilas Company is considering a capital investment of $190,100 in additional productive facilities. The new machinery is expected to have a useful life.
During the latest year Ruth Corp. had sales of $300,000 and a net income of $20,000, and its year-end assets were $200,000. The company's total debt to total assets ratio was 40 percent
Lets extend the discussion by examining the practical implications of these concepts. What is meant by an indexing portfolio strategy and what is the justification for this strategy?
How much insurance are you required to have on your home if you do not want any claims to be penalized and the replacement cost of your home is $250,000?
If the required return on the stock is 8 percent, what is the current share price?
A 25-year Treasury bond is issued with face value of $1,000, paying interest of $62 per year. If market yields increase shortly after the T-bond is issued, what is the bond's coupon rate?
Rockinghouse Corp. plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $475.03. Assuming annual coupon payments, what is the yield to maturity on these bonds?
If the spot rate is quoted as $0.009369/¥, what is the exchange rate in terms of yen per dollar?
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