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1) Company HTA had a free cash flow for the firm (FCFF) of $1,500,000 last year. It is expected the FCFF will keep a sustainable growth rate of 5%. The company has 2 million common shares outstanding. In addition, the following information has been gathered: Capital structure: D/E=0.2:0.8, Market value of Debt: VD =$5,000,000; Required return on equity: kE =15% Cost of debt before tax =6%, Tax rate: tc =25%; Determine the fair value of HTA stock.2) Company JUK has a ROE of 25% and the company will not pay any dividend for the next 3 years. It is estimated that the company will pay $2 dividend per share after three years and then to level off to 5% per year forever.The company has a beta of 2. Assume the risk-free interest rate is 4%, and the market risk premium is 8%.1. What is your estimate of the fair price of a share of the stock?2. If the market price of a share is equal to this intrinsic value, what is the P/E ratio?3. What do you expect its price to be 1 year from now? Is the implied capital gain consistent with your estimate of the dividend yield and the market capitalization rate?
3).MicroSense, Inc., paid $2 dividends per share last year. It is estimated that the company’s ROEs will be 12% and 10%, respectively, next two years. The plowback rate in next two years will be 0.6. It is expected that the dividends will grow at a sustainable rate of 3% per year after two years. Assume that the expected return on the market is 8%, the risk-free rate is 4%, and the beta of the stock is 1.4. What is the fair price of the stock?4). An analyst uses the constant growth model to evaluate a company with the following data for a company:Leverage ratio (asset/equity): 1.8Total asset turnover: 1.5Current ratio: 1.8Net profit margin: 8%Dividend payout ratio: 40%Earnings per share in the past year: $0.85The required rate on equity: 15%Based on an analysis, the growth rate of the company will drop by 25 percent per year in the next two years and then keep it afterward. Assume that the company will keep its dividend policy unchanged.1. Determine the growth rate of the company for each of next three years.2. Use the multi-period DDM to estimate the intrinsic value of the company’s stock.3. Suppose after one year, everything else will be unchanged but the required rate on equity will decrease to 14%. What would be your holding period return for the year?
Interest equivalent factor, Lori Stratton is considering investing in a bond that provides a yield of 8.35 percent or a preferred share with a yield of 7.09 percent. Lori lives in Ontario and at her level of taxable income, the federal tax rate is ..
Which of the following is not a function of the foreign exchange market?
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The Elvisalive Corporation, makers of Elvis memorabilia, has a beta of 2.75. The expected return on the market is 14% and the risk free rate is 4%. According to the CAPM, what is the expected return on Elvisalive stock?
Your father is about to retire, and he wants to buy an annuity that will provide him with $85,000 of income a year for 25 years, with the first payment coming immediately. The discount rate on such annuities is 5.15%. How much would it cost him to..
Describe the various actions that you might take and their implications.
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The expansion plan can be financed with additional long-term debt at a 12% interest rate or the sale of new common stock at $8 per share. The firm's marginal tax rate is 40%. Determine the indifference level of EBIT for the two financing plans.
Current and projected free cash flows for Radell Global Operations are shown below. Growth is expected to be constant after 2012, and the weighted average cost of capital is 11%. What is the horizon (continuing) value at 2012?
the bigbee bottling company is contemplating the replacement of one of its bottling machines with a newer and more
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