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Two FCFF Valuation problems below...
1. Gamecocks Inc.'s free cash flow to the firm (FCFF) was $20 million in its most recent fiscal year that just ended. The company's FCFF is expected to grow steadily at 5% per year in perpetuity. The company's weighted average cost of capital is 9.8%. The market value of the company's debt equals 26% of its total value and the rest is the value of its common stock. If Gamecocks has 10 million common shares outstanding, what is the value of each share?)_______(round to the nearest cent)
2. A company’s FCFF in its most recent fiscal year was $50 million. FCFF is expected to grow at a rate of 4% in perpetuity. The company’s weighted average cost of capital is 9%. The face value of its outstanding bonds is $500 million, paying annual coupons with a coupon rate of 6% maturing in 5 years, and have a YTM of 5.5%. The company pays annual preferred dividends of $70 million and the required return of preferred stockholders is 7%. The company has 22 million common shares outstanding. What is the value of each common stock?
You bought a house at $312,500 and borrowed $250,000 in a fully amortizing 30 year fixed-rate mortgage at an interest rate of 7% to buy your home 5 years ago. You have lived in your home for 5 years and still have the original loan. How much could yo..
Define the current ratio and return on assets ratio. State what financial management problem each of these financial ratios could be used to identify. What would be a good benchmark to use for each of these financial ratios?
Decision trees are often used to analyze multistage, or sequential, decisions. The Monte Carlo simulation describes uncertainty in terms of continuous probability distributions, which have a limited number of outcomes, rather than infinite discrete v..
Thornley Machines is considering a 3-year project with an initial cost of $660,000. The project will not directly produce any sales but will reduce operating costs by $400,000 a year. The equipment is depreciated straight-line to a zero book value ov..
You have $130,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 14.6 percent. Stock X has an expected return of 12.8 percent and a beta of 1.30, and Stock Y has an expected ..
Use the Income Statement and Balance Sheet to determine the changes in: assets, liabilities, and equity total revenue and net income Briefly describe the change from the current and prior years in each of these key areas and determine if the changes ..
Assume you believe in the EMH and assume you have $500,000 to invest for long term (20-25 years). Allocate your $500,000 to 5 to 7 ETFs or REITs. Explain why those 5-7 ETFs or REITs.
On January 1, 2009 Herbert acquired all of the outstanding stock of Rambis for $500,000. Annual excess amortization of $20,000 resulted from this acquisition. what is the adjustment to Herbert’s Investment account and beginning Retained Earnings. wha..
I need to prepare a financial analysis for 2008 and 2009 for Under Armour - http://investor.underarmour.com/investors.cfm. The financial analysis should include:-Current ratio, Quick ratio, Net profit margin, Return on investment
Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $136 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for th..
Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures abov..
Financial analysts have developed two performance measures: Market Value Added (MVA) and Economic Value Added (EVA). Discuss and explain both. Which is a better representative of the firm’s performance, and why?
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