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Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 9%. The company's weighted average cost of capital is 15%.
What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Round your answer to the nearest cent.
$ ____________
Calculate the value of Kendra's operations. Round your answer to the nearest cent. Round intermediate calculations to two decimal places.
When a bond goes on special, the repo rate for borrowing against that bond goes below the General Collateral Rate (GCR) which applies to all other Treasury bonds. Why does that not lead to arbitrage opportunities?
What are the portfolio weights for a portfolio that has 152 shares of Stock A that sell for $30 per share and 120 shares of Stock B that sell for $20 per share? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g.,..
ennedy Air Services is now in the final year of a project. The equipment originally cost $35 million, of which 90% has been depreciated. Kennedy can sell the used equipment today for $8.75 million, and its tax rate is 40%. What is the equipment's aft..
A stock price is currently $50. Over each of the next two 3-month periods it is expected to go up by 7% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. The strike price is $52 for a European call. alue the opti..
The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. What is the discounted payback period for t..
BB Baits, Inc. sells fog machines. Use the following information about BB Baits, Inc. to answer the question below. Average selling price per unit = $332 Variable cost per unit = $216 Units sold = $375 Fixed costs = $17657 Interest expense = $4324 Ba..
Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has six years to maturity, whereas Bond Dave has 19 years to maturity. If interest rates suddenly rise by 2 percent, what is the perce..
Robert Hitchcock is 39 years old today and he wishes to accumulate $561,500 by his 60th birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his 39th through his 59th birthda..
Use two decimal places in your answers. All problems are worth one point each except 6a is worth two points. A firm plans to issue $5,000,000 of commercial paper for 30 days. A dealer will issue the paper at $4,985,000 at a fee of $2,000 in advance. ..
John took a mortgage loan 5 years ago for $120,000 at 7% interest for 15 years, to be paid in monthly payments. Now, a lender is offering him a new mortgage loan at 5% for 10 years. What is the total financing cost (not include the loan amount itself..
Leslie owns 1,200 shares of Good Manners stock. Good Manners will pay a $1.12 per share dividend one year from now and a $1.32 per share dividend two years from now. Leslie does not want any dividend this year but does want as much dividend income as..
Consider an asset that costs $977,000 and is depreciated straight-line to zero over its ten-year tax life. The asset is to be used in a seven-year project; at the end of the project, the asset can be sold for $135,200. If the relevant tax rate is 40 ..
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