What is the terminal value of the firms cash flows

Assignment Help Financial Management
Reference no: EM13951764

River Walk Tours is expected to have an EBIT of $354,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $24,000, $2,000, and $33,000, respectively. All are expected to grow at 7 percent per year for three years. After year 4, the adjusted cash flow from assets is expected to grow at 3.2 percent indefinitely. The company’s WACC is 9.2 percent and the tax rate is 34 percent.

What is the terminal value of the firm’s cash flows?

A.$4,123,008

B.$4,691,189

C.$3,711,052

D.$4,008,051

E.$3,992,419

Reference no: EM13951764

Questions Cloud

Calculate operating cash flow for the year : The owner of a bicycle repair shop forecasts revenues of $240,000 a year. Variable costs will be $70,000, and rental costs for the shop are $50,000 a year. Depreciation on the repair tools will be $30,000. The tax rate is 30%. Calculate operating cas..
What will be the annual impact on profit of obtaining : Abruzzi sells its oil for $25 per gallon. The variable cost per gallon is $10.What will be the annual impact on profit of obtaining the Consolidated business (assuming there is no capacity problem)?
Description of the organization : Milestone One: Problem Identification, Select an organization in which you are, were, or hope to be employed. Include in the paper the following: Paper title and Description of the organization
The cost of equity for a firm with a debt-equity ratio : The cost of equity for a firm with a debt-equity ratio of .35:
What is the terminal value of the firms cash flows : River Walk Tours is expected to have an EBIT of $354,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $24,000, $2,000, and $33,000, respectively. What is the terminal value of the firm’s cash f..
Binomial model and no-arbitrage argument : A stock price is currently $50. It is knows that at the end of six month, it will be either $55 or $35. The risk-free rate of interest with continuous compounding is 6% per annum. Calculate the value of a three-month European call option on the stock..
How effective was the od consultants data gathering : How effective was the OD consultants' data gathering? The content of the data? The process of how the data were collected? Use force-field analysis to analyze the data. What conclusions would you draw from the analysis
What is the company total market value of debt : Jiminy’s Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 40 percent. What is the company’s total book val..
Analysis and relevance to corporate valuation sections : Executive style overview and summary, with the majority of your article review content in the Opinion and Analysis and Relevance to Corporate Valuation sections.

Reviews

Write a Review

 

Financial Management Questions & Answers

  Federal-plus-state corporate tax rate

Fredrickson Corp. has $10 million of 5% bonds outstanding. Assume that all of the MM assumption is met, and the firm is subject to a 38% federal-plus-state corporate tax rate. The firm has an EBIT of $1.5 million, and the unlevered cost of equity is ..

  What is gregs effective annual rate

At one point, Greg was having four packs of gum a day. Each pack of gum costs $2.00 Greg decides to cut his gum usage to 2 packs a day and invest his savings in large-cap stocks with a yield of 12.7% per year historically. Greg has 30 years to invest..

  What is the expected return on the market

The stock of Alpha Company has an expected return of 16.25% and a beta of 1.35, and Gamma Company stock has an expected return of 10.50% and a beta of X. The beta of a portfolio P is 1.05. The portfolio P consists of 40% of the investment in Alpha an..

  Uncertainties that are not quantifiable

If an investment has a 20%(0.20) probability of returning $1,000; a 30%(0.30) probability of returning $1,500; and a 50%(0.50) probability of returning $1,800; the expected value of the investment is: Uncertainties that are not quantifiable: Suppose ..

  What is the securitys equilibrium rate of return

Determinants of Interest Rate for Individual Securities A particular security's default risk premium is 3.00 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 2.75 percent. The security's liquidity ..

  Considering changing its capital structure

Pennewell Publishing Inc. is a zero growth company. It currently has zero debt and its earnings before interest and taxes are $90,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding..

  Growth rate drop-what is the market value in one year

Warner is expected to have its growth rate drop from 15% to 5% in 5 years. The last dividend was $2 and the discount rate is based on beta of 2, T bond rate of 6% and return of the market of 11%. First, find the value of Warner. Second, compute the y..

  What is the value of vandells operations

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.9%.  Vandell's free cash flow (FCF0) is $2 million ..

  Exceeds their before tax costs of debt

Company A and Company B have the same tax rate, the same total assets, and the same basic earning power. Both companies have a basic earning power that exceeds their before tax costs of debt. However, Company A has a higher debt ratio.

  When a firm issues securities to the public

When a firm issues securities to the public for the very first time, these are generally under-priced. Explain why.

  How much will you pay for the companys stock today

Caan Corporation will pay a $2.86 per share dividend next year. The company pledges to increase its dividend by 3.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock..

  Controlling interest in instapower

On February 18, 2014, Q-Car Corporation announced its plan to acquire 90% of the outstanding 1,000,000 shares InstaPower Corporation’s common stock in a business combination later in the year following regulatory approval. What is the total considera..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd