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Siebel Incorporated, a non-publicly traded company, has 2009 after-tax earnings of $21 million, which are expected to grow at 6 percent annually into the foreseeable future. The firm is debt-free, capital spending equals the firm's rate of depreciation; and the annual change in working capital is expected to be minimal. The firm's beta is estimated to be 1.85, the 10-year Treasury bond is 5.5 percent, and the historical risk premium of stocks over the risk-free rate is 5.5 percent. Publicly-traded Rand Technology, a direct competitor of Siebel's, was sold recently at a purchase price of 12 times its 2009 after-tax earnings, which included a 25 percent premium over its current market price. Aware of the premium paid for the purchase of Rand, Siebel's equity owners would like to determine what it might be worth if they were to attempt to sell the firm in the near future. They chose to value the firm using the discounted cash flow and comparable recent transactions methods. They believe that either method provides an equally valid. Estimate of the firm's value. a. What is the value of Siebel using the DCF method? Make sure to show your work. b. What is the value using the comparable recent transactions method? Make sure to show your work. c. What would be the value of the firm if we combine the results of both methods? Make sure to show your work.
Next year free cash flows for the AA company is expected to be $10 million. It is expected to grow for the following two years at 10% and then for 9% for the following year. You have determined that the EV/EBITDA for the firm in year 5 is expected to..
Obtain the annual report of a well-known company.- You are the owner of a company that is about to "go public"-that is, issue its stock to outside investors.
Nu-platinum is a highly successful mining company. The company just paid a dividend on the stock of $0.60. Business has been growing well over the past few years and is expected to do so at 25% for the next 3 years. If the required return is 20% what..
if rbc's stock goes up to $94 per share and td's stock falls to $72 per share, what is your portfolio return?
The Wall Street Journal reports that the current rate on 9-year Treasury bonds is 5.90 percent, the rate on 16-year Treasury bonds is 6.30 percent, and the rate on a 16-year corporate bond issued by MHM Corp. is 7.45 percent. calculate the current ra..
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. What is the HPY on your investment?
Smith Corporation has 150,000 shares of stock outstanding, total shareholders equity of $10 million, What is the company's market capitalization?
You parents purchased their home 20 years ago. They financed over 30 years with a 6% fixed rate mortgage with monthly compounding and have been making monthly payments of $1,438.92. What is the current balance of the loan?
Verify this result and explain what happens to the continuously compounded 90-day forward rate as the 120-day LIBOR rate increases.
Which of the following cash flows are incremental cash flows that need to be considered when evaluating a capital project?
If the Dow Jones Industrial Average (a measure of the overall strength of the stock market, usually abbreviated “DJIA”, as we discussed in class) increases by 1.2% on Monday, by 0.7% on Tuesday, 2.4% on Wednesday, 1.8% on Thursday, and 0.2% on Friday..
The current price of a stock is $16. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 4%. Find the price of a call option on the stock that has an strike price of $14 and that expires in 6 months. (Hint: Use daily compou..
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