a. Covan has 7 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 13%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2?
Q: Clark Industries has 200 million shares outstanding, a current share price of $30, and no debt.…
A: Total Number of shares outstanding are 200 million Share price is $30 Cash in hand or distributable…
Q: Rome Corporation invests in the research and development department and will not pay dividends for…
A: PV=FV/(1+i)n, which divides the future value FV by a factor of 1 + I for each interval between the…
Q: The common stock and debt of Northern Sludge are valued at $72 million and $12 million,…
A: Total Capital=$72 Million+$12 Million=$84 Million Weight Of Current Equity=$72 Million$100 Million…
Q: Rebecca owns $20,000 worth of stock in the company. If the firm has a 100 percent payout, what is…
A: Information Provided: Debt = 40% Shares outstanding = 2500 Price = $80 EBIT = $23,990 Interest…
Q: LL corporation has $500M of excess cash. The firm has no debt and 1K shares outstanding with a…
A:
Q: Muscat company is expected to pay a $1.35 dividend next year and they expect dividends to grow at 3…
A: A stock is a unit of the capital of a corporation that is issued in the financial markets for the…
Q: Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is…
A:
Q: The common stock and debt of Northern Sludge are valued at $70 million and $30 million,…
A: Value of Common Stock =$70 million Value of debt = $30 million Weight of Common stock = 70/(30+70) =…
Q: Love Inc. believes that at its current share price of P16.00 the firm is undervalued. Makeover plans…
A: Note:- Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: Kelso Electric Is an all-equity firm with 59,000 shares of stock outstanding. The company is…
A: The following formula will be used:
Q: Memo Corporation is about to launch a new product. Depending on the success of the new product, Memo…
A: The value of firm is the total of value of debt and the value of equity. The value of debt means how…
Q: Cygnus has a dividend cover ratio of 4.0 times and expects zero growth in dividends. The company has…
A: Given Information, Dividend Cover ratio = 4 Expected growth in dividend = 0 Ordinary Shares of…
Q: Covan, Inc. is expected to have the following free cash flow: Year 1 2 3 FCF 11 13 14 15 Grow by 4%…
A: FCF refers to the free cash flow that helps in identifying the valuation of an organization.
Q: The CFO of General Electric corporation is deciding if his company should invest 500,000 shares of…
A: a) According to the dividend yield formula, dividend yield is dividend divided by the price of the…
Q: Hema Corp. is an all-equity firm with a current market value of $1,230 million (i.e., $1.23…
A: Bankruptcy cost is considered to avoid financial devastation, companies can be bankruptcy after…
Q: The total market value of the common stock of the Okefenokee Real Estate Company is $7.5 million,…
A: As the student has asked the 4th parts. Therefore, I'm answering the 4th part only. Required return…
Q: Natsam Corporation has $268 million of excess cash. The firm has no debt and 481 million shares…
A: The profits of the company refer to the income generated by the company and left with the company…
Q: The total market value of the common stock of the Okefenokee Real Estate Company Is $7.5 million,…
A: Cost of equity represents the rate of return to be received by the equity owners for their capital…
Q: Good Values, Inc., is all-equity-financed. The total market value of the firm currently is $100,000,…
A: The value of the firm derives from the value of shares. It depends upon the repurchase decisions as…
Q: An all-equity firm currently has 1,000,000 shares of stock outstanding and is considering borrowing…
A: Current EBIT $15,00,000 Less: Tax (30%) $4,50,000 Profit after Tax $10,50,000 Number of Share…
Q: Covan, Inc. is expected to have the following free cash flow: Year 1 2 3 4 FCF 13 15 16 17 Grow by…
A: Value of Shares = Present Value of FCF + Cash - Debt Price of Shares = Value of Shares/Number of…
Q: Portage Bay Enterprises has $4 million in excess cash, no debt, and is expected to have free cash…
A: Data given: Excess cash= $4 million Debt= nil Expected free cash flow next year = $ 14 million…
Q: The Dunn Corporation is planning to pay dividends of $540000. There are 270000 shares outstanding,…
A: Given: Given:
Q: A firm has 10 million shares outstanding with a market price of P20 per share. The firm has P25…
A: Given, Outstanding Shares = 10 million or 10,000,000 Market Value Per Share = P20 per…
Q: The total market value of the common stock of the Okefenokee Real Estate Company is $7.5 million,…
A: According to the rule, we will only answer the first three subparts, ofr the remaining subparts,…
Q: Natsam Corporation has $291 million of excess cash. The firm has no debt and 526 million shares…
A: A firm is at liberty to take a decision on how to disburse the excess cash at hand. It may decide…
Q: In an M&M world with taxes, Roll Inc. is an all equity firm with an unlevered return of 16%. The…
A: 1. Cost of Equity: =16%+(16%-7%)*1600000/(9375000+1600000*25%-1600000)*(1-25%) =17.3211%
Q: Ali Inc. expects to generate free-cash of $330000 per year forever. If the firm's cost of capital is…
A: Disclaimer: Since you have asked multiple questions, we will solve the first question for you. If…
Q: A firm has 10 million shares outstanding with a market price of $20 pershare. The firm has $25…
A: The difference of the sum of equity and debt of a company and the cash and cash equivalents is term…
Q: A corporation has 2 million shares selling at a price of 30 lei per share. The current debt ratio of…
A: The weighted average cost of capital refers to the combined and composite cost of different sources…
Q: The preferred stock of Gator Industries sells for $35 and pays $2.75% per year in dividends. What is…
A: The preferred stock cost of a corporation is the amount it spends in return for the revenue…
Q: Organica Ltd. generates $350,000 cash flow each year. The cost of equity capital is 18% and the…
A: The question is related to the theories of Capital Structure. As per Modigliani and Miller…
Q: LL corporation has $500M of excess cash. The firm has no debt and 1K shares outstanding with a…
A: Dividend per share = Total dividend paid/number of shares outstanding
Q: What is CC’s current debt-to-equity ratio? What is CC’s current stock price? If CC distributes $18…
A: Debt to Equity Ratio: This ratio is applied for the evaluation of the business's financial…
Q: Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also…
A: A business's replacement cost is the amount of money it costs to replace an essential asset. It…
Q: n all-equity firm currently has 1,000,000 shares of stock outstanding and is considering…
A: The earning per share is important factor for shareholders and if the EPS is increasing than it is…
Q: Jiffy Wax Corp. can sell common stock for $ 15 per share and its investors require a 14% return.…
A: The dividend discount model is the model of valuing stock and cost of capital, by assuming that the…
Q: Scarab Technologies is expected to generate $175 million in free cash flow next year, and FCF is…
A: Free cash flow next year = 175 million Growth rate = 7% WACC=10% Share outstanding = 45million
Q: Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares…
A: Solution-1 Current Market Price $17.00 Per share Dividend per share ($250 million / 600…
Q: A firm has 5 million shares outstanding with a market price of $35 per share. The firm has $10…
A: Formulas used: Total Corporate value = No.of shares*Market Price Value of operations = Total…
Q: National Company expects P30,000,00 in earnings next year. Its dividend payout ratio is 40%, and its…
A: Expected earnings = P30,000,000 Dividend payout ratio = 40% Equity to asset ratio = 40%
Q: Portage Bay Enterprises has $2 million in excess cash, no debt, and is expected to have free cash…
A: To calculate the equity value of the firm and the stock price we need to calculate the enterprise…
Q: Scampini Technologies is expected to generate $100 million in free cash flow next year, and FCF is…
A: The value of the stock will be the value of the equity/firm divided by the number of shares…
Q: ABC Corporation has debt with a value of $100 million and common stock with a market value of $200…
A: WACC as per current situation Particulars Return Weight Weighted Debt 6% 1 6% Equity 15% 2…
Q: Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment. After…
A: As per the given information: Investment amount - $50 millionFree cash flows - $10 millionShares…
Q: Covan, Inc. is expected to have the following free cash flow: Year 1 2 3 4 FCF 13 15 16 17 Grow by…
A: given, r=10% g=5% cash = $3 million shares = 6 million
Q: Company Z has a total value of $ 500,000. On its balance sheet, it has a debt of $ 150,000 paid at…
A: The capital structure is the structure of source of finance of funds of the company.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- Covan, Inc. is expected to have the following free cash flow: Year 1 2 4 .. FCF 13 15 16 17 Grow by 4% per year a. Covan has 7 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 12%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 7 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 12%, what should be its stock price? The stock price should be $1. (Round to the nearest cent.) b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ 1. (Round to the nearest cent.)…Covan, Inc. is expected to have the following free cash flow: Year FCF 1 12 2 14 3 15 4 16 Grow by 3% per year a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? The stock price should be $ (Round to the nearest cent.)Kohwe Corporation plans to issue equity to raise $50.7 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10.4 million each year. Kohwe's only asset is this investment opportunity. Suppose the appropriate discount rate for Kohwe's future free cash flows is 7.7%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is the value of Kohwe if it finances the investment with equity? a. What is the NPV of Kohwe's investment? The NPV of Kohwe's investment is $ million. (Round to two decimal places.) b. What is the value of Kohwe if it finances the investment with equity? The Kohwe finances stment with equity $ million. (Round decimal places.)
- Cede & Co. expects its EBIT to be $163000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its cost of equity is 10 percent. The tax rate is 23 percent. If the company borrows $185,000 and uses the proceeds to buy back equity, what is the weighted average cost of capital after the recapitalisation is complete? Group of answer choices 9.67% 15.13% 14.32% 8.17%Cede & Co. expects its EBIT to be $163000 every year forever. The company can borrow at 8 percent. The company currently has no debt and its cost of equity is 10 percent. The tax rate is 23 percent. If the company borrows $185,000 and uses the proceeds to buy back equity, what is the weighted average cost of capital after the recapitalisation is complete? O 15.13% O 9.67% O 14.32% O 8.17%Calvert Corporation expects an EBIT of $25,500 every year forever. The company currently has no debt, and its cost of equity is 15.4 percent. The company can borrow at 10.2 percent and the corporate tax rate is 21 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-1. What will the value of the firm be if the company takes on debt equal to 50 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c-1. What will the value of the firm be if the company takes on debt equal to 50 percent of its levered value? (Do not round intermediate calculations and round your answers to 2 decimal places,…
- Calvert Corporation expects an EBIT of $25,100 every year forever. The company currently has no debt, and its cost of equity is 15.2 percent. The company can borrow at 10 percent and the corporate tax rate is 24 percent. a. What is the current value of the company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-1. What will the value of the firm be if the company takes on debt equal to 60 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b-2. What will the value of the firm be if the company takes on debt equal to 100 percent of its unlevered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)c-1. What will the value of the firm be if the company takes on debt equal to 60 percent of its levered value? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,…Meyer & Co. expects its EBIT to be $97,000 every year forever. The firm can borrow at 8 percent. The company currently has no debt, and its cost of equity is 13 percent. The tax rate is24 percent. 1. What is the value of the firm?2. What is the value if the company borrows $195,000 and uses the proceeds to repurchaseshares?3. What is the cost of equity after recapitalization?4. What is the WACC?5. What are the implications of the firm’s decision to borrow?The Barrell Company is approached by a bank that offers to implement a lockbox system of receipts for the firm. If the new system is implemented, it will reduce float by 6 days per year. If Barrell's cost of capital is 11.5% and its annual sales are expected to be P10,00,000, then what is the maximum amount that Barrell is willing to pay for the lockbox system? O P164,438.56 O P18,904.11 O P1,150,000.00 O P1,890.41
- Milton Industries expects free cash flows of $19 million each year. Milton's corporate tax rate is 22 %, and its unlevered cost of capital is 13%. Milton also has outstanding debt of $73.37 million, and expects to maintain this level of debt permanently. a. What is the value of Miton Industries without leverage? b. What is the value of Milton Industries with leverage? Cam a. What is the value of Milton Industries without leverage? The value of Milton Industries without leverage is 5 million (Round to two decimal places.) b. What is the value of Milton Industries with leverage? The value of Milton Industries with leverage is $million. (Round to two decimal places)Milton Industries expects free cash flows of $4 million each year. Milton's corporate tax rate is 30%, and its unlevered cost of capital is 12%. Milton also has outstanding debt of $24.27 million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without leverage? b. What is the value of Milton Industries with leverage? a. What is the value of Milton Industries without leverage? The value of Milton Industries without leverage is $ million. (Round to two decimal places.) b. What is the value of Milton Industries with leverage? The value of Milton Industries with leverage is $ million. (Round to two decimal places.)Betatech has some slightly obsolete equipment that still has a book value of $280,000 on their balance sheet. They can sell the equipment now for $210,000, and they would recover $40,000 in working capital. Their tax rate is 21%. If they sell the equipment, what would be the terminal cash flow? O $264,700 O $268,900 O $205,900 O $228,900 O $165,900