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Company A’s current free cash flow is $2 dollars and forecasts its FCFF to grow at 0% for 2 years, then 10% for 2 years, then at 5% forever. The firm is consisted of 100% equity and has no debt. If the company’s beta is 1.5, the risk free rate is 2% and the market return is 10%. What will be the equity value of the firm today using DCF model?
Suppose you plan to send your daughter to college in three years. You expect her to earn two-thirds of her tuition payment in scholarship money, so you estimate that your payments will be $10,000 a year for four years. To estimate whether you have se..
The internal rate of return of a capital investment
The current price of a stock is $19. In 1 year, the price will be either $25 or $14. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compound..
An American Depository Receipt (ADR) is a security issued by a U.S. bank and traded on a U.S. stock exchange that represents a specific number of shares of a foreign stock. Siemens AG has an ADR that trades on the NYSE and is equivalent to one share ..
Which one of the following will increase the value of a firm's net working capital?
Other things being equal, would a firm prefer a longer or shorter Cash Conversion Cycle? What are some examples of ways a firm could attain this
To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semi annually, sells at a price of $1,075, and has a par value of $1,000..
Which of the following will have the greatest average life variability and least average life variability: (i) the collateral, (ii) the PAC bond, or (iii) the support bond? Why?
The Outlet has an unlevered cost of capital of 14.2 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $23,400. The company has $23,000 in bonds outstanding that have a coupon rate of 7 percent. The bonds are sellin..
Use the free cash flow valuation method to find the value per share for the following firm: A firm has just reported free cash flow to the firm (FCFF) for the last year as having been $65 Million.
A 4.40 percent coupon municipal bond has 16 years left to maturity and has a price quote of 105.50. The bond can be called in eight years. The call premium is one year of coupon payments. Compute the bond’s current yield. Compute the taxable equivale..
An infinite series of cash flow pays $10 one year from today. After that the annual cash payment increases 5% per year forever. Does the infinite series of cash flow have a finite value today?
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