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hichkok12 [17]
2 years ago
14

Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.

Business
1 answer:
Katarina [22]2 years ago
5 0

The stock price is mathematically given as

P=$57.64

<h3>What is the stock price?</h3>

Generally, the equation for is Value after year  mathematically given as

V=\frac{(FCF for year 5*Growth rate)}{(WACC-Growth rate)}\\\\V = \frac{(55.4*1.05)}{(0.09-0.05)}

V= $1454.25

Hence, the current value is mathematically given as

I=Discounting factor equal to the future cash flows multiplied by their present value

I=\frac{-22.76}{1.09} + \frac{38.8}{1.09^2}+ \frac{43.4}{1.09^3}+\frac{52.3}{1.09^4}+\frac{55.4}{1.09^5}+\frac{1454.25}{1.09^5}

I=$1063.508769

current value for ordinary stock

I'=$1037.508769million

In conclusion, the stock price is

P=(1037.508769/18)

P=$57.64

Read more about the stock price

brainly.com/question/15021152

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Answer:

The NPV = $1578.185602 rounded off to $1578.19

As the NPV is positive, the project should be accepted.

Explanation:

The Net Present Value or NPV is a tool used to evaluate projects. It is used with various other tools to decide whether to undertake a project or not. To calculate the Net Present Value or NPV, we take the present value of the cash inflows provided by the project and deduct the initial cost of the project.  If the NPV is positive, we should proceed with the project and vice versa.

NPV = CF1 / (1+r)  +  CF2 / (1+r)^2  +  ...  + CFn / (1+r)^n  -  Initial Cost

Where,

  • CF1, CF2, ... represents cash flow in Year 1, Year 2 and so on.
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NPV = 3200 / (1+0.17)  +  3200 (1+0.17)^2  +  3200 (1+0.17)^3  +  

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NPV = $1578.185602 rounded off to $1578.19

4 0
3 years ago
Your father paid $10,000 (cf at t = 0) for an investment that promises to pay $750 at the end of each of the next 5 years, then
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From the problem statement it is clear that here we need to find out simple interest rate. 
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Putting this mathematically:
 Let amount at the end of 5th year as A 
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 Let rate of return = R
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  A = P(1 + R*t/100)
 13750 = 10000( 1+ R*5/100)
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Therefore the same is relevant

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