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Gunco Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of it earnings. In other words, Gunco does not pay any dividends and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Gunco’s stock. The pension fund manager has estimated Gunco’s FCF for the next 4 years as follows: $4 million, $5 million, $11 million, and $14 million. After the forth year, FCF is projected to grow at a constant 5%. Gunco’s WACC is 10%, the market value of its debt and preferred stock totals $55 million, and it has 100 million shares of common stock outstanding. What is an estimate of Gunco’s price per share? You must show your work (your calculator inputs and math) to receive full credit.
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next few years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $3 per share dividend in year 6 and wi..
An Asset currently trades at price S0. Let V0 be the current price (call premium plus put premium) of an at-the-money straddle on A expiring in one month. You have an initial capital amount of C0 and execute the following strategy. - keep C in cash w..
You are the manager of an independent manufacturer that sells protective cases for the Samsung Galaxy. Samsung produces half of its phones at a plant near Hong Kong and the other half at a plant located near Shanghai.
Stock market indices are used for all of the following except: a) to serve as a benchmark for judging performance of asset managers b) to help analyze stock market returns on a global basis c) to help perform technical analysis of the overall market ..
Expectations Theory Interest rates on 4-year Treasury securities are currently 6.2%, while 6-year Treasury securities yield 7.45%. If the pure expectations theory is correct, what does the market believe that 2-year securities will be yielding 4 year..
A six-month Twitter call option with an exercise price of $50.00 was traded at $4.25 per option on February 27, 2015. Assume that the risk free rate was 1.2% per year and stock price for Twitter on February 27, 2015 was $48.08. Twitter Inc. does not ..
Describe at least 5 bond provisions and discuss whether they make bonds more or less risky. Exercise: Consider two bonds, everything else the same except the provision. Would Bond A with the provision be more or less risky than Bond B without the pro..
What is the future value of $10,000 for an interest rate of 16% and 1 annual period of compounding? For an annual interest rate of 16% and 2 semi-annual periods of compounding?
Spencer Inc has the following information for the current year: Net income=$600; Net operating profit after taxes (NOPAT) = $600; Total assests = $4,000; short term investments = $500; stockholders equity =$2000; debt=$1000; and total net operating c..
You plan to make monthly deposits of $500 into a retirement account that pays 12% interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years?
Serena receives a fifty-year annuity due that has payments that start at $2,000 and increase by 3% per year through the twenty-fourth payment, then stay level at $4,000. Find the accumulated value of this annuity at the end of fifty years if the annu..
The Time Value of Money and Financial Statement Analysis Conducting Financial Ratio Analysis Select a publicly traded U.S. company that has paid a dividend for at least the last three years, and conduct a financial ratio analysis. You will be using t..
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