1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Elodia [21]
3 years ago
9

Quantitative Problem 1: Assume today is December 31, 2017. Barrington Industries expects that its 2018 after-tax operating incom

e [EBIT(1 – T)] will be $450 million and its 2018 depreciation expense will be $65 million. Barrington's 2018 gross capital expenditures are expected to be $110 million and the change in its net operating working capital for 2017 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 4.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 9%; the market value of the company's debt is $3 billion; and the company has 180 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects. Using the free cash flow valuation model, what should be the company's stock price today (December 31, 2017)? Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
Business
1 answer:
ziro4ka [17]3 years ago
3 0

Answer:

$29.630

Explanation:

For computation of stock price first we need to follow some steps which is shown below:-

Free cash flow = EBIT (1 - T) + Depreciation - Capital expenditure - Working capital

= $450 million + $65 million - $110 million - $30 million

=  $375 million

Value of firm = Free cash flow ÷ (WACC - Growth)

= $375 million ÷ (9% - 4.5%)

= $375 million ÷ 0.045

= $8,333.33 million

Value of equity = Value of firm - Value of debt

= $8,333.33 million - $3,000 million

= $5,333.33 million

Stock price = Value of equity ÷ Outstanding shares

= $5,333.33 million ÷ 180 million

= $29.630

You might be interested in
What is the difference between ancient trade and modern trade ​
alexira [117]

Answer:

The main difference between traditional trade and modern trade is that, distribution in modern trade is more organized. Retailers often deal directly with manufacturers. Many large retail chains have integrated their services to offer their own brands in groceries and other goods.

Explanation:

6 0
3 years ago
the policy loan provision means that a. an individual can take out a loan on his term policy. b. the death benefit will be incre
Alenkasestr [34]

According to the policy loan clause, the policy owner may borrow any sum up to the policy's cash value. As a result, choice (C) is the best way to respond.

<h3>What is policy loan?</h3>

A policy loan is given out by an insurance provider and is secured by the cash value of the borrower's life insurance policy. A "life insurance loan" is another name for it. They used to be renowned for having cheap interest rates, but that isn't necessarily the case now.

Even though they have limitations, policy loans typically provide easy access to money. When a universal or whole life insurance policy has built up cash value, policy loans may be taken out.

Hence, option (C) is the accurate one.

Learn more about policy loans, from:

brainly.com/question/14971100

#SPJ1

5 0
1 year ago
wendy and doug would like to purchase a home. their combined gross monthly income is 4200. how much can they afford for a monthl
dusya [7]
They could do $1,500 a month payment to the renter.
5 0
3 years ago
What is one advantage of buying a used car instead of a new car?
sukhopar [10]
Ok so one of the biggest advantages would be a lower price but not only that if it is a newer car you wont have to pay the newer car fees you basically avoid them.<span />
3 0
3 years ago
The business-to-business cleaning supply company, Ecolab, encouraged a leading competitor, Diversity, to adopt a strategy to go
Sveta_85 [38]

Answer:

Raise competitor costs.

Explanation:

Raising competitor costs is basically a strategy to gain market share.

8 0
3 years ago
Other questions:
  • Suppose an initial investment of $80 will return $30/year for three years (assume the $30 is received each year at the end of th
    8·1 answer
  • Order the bond types below from lowest to highest risk of default.
    13·2 answers
  • This year henry realized a gain on the sale of an antique car that he inherited from his uncle. the buyer has promised to pay he
    9·1 answer
  • _________________ is the method used to determine the number of units a firm must sell at a specific price to cover all costs.
    12·1 answer
  • You are given two choices of​ investments, Investment A and Investment B. Both investments have the same future cash flows. Inve
    10·1 answer
  • An installment note payment includes a.interest. b.principal plus interest. c.principal. d.None of these choices are correct.
    12·1 answer
  • 30 points please help!
    11·1 answer
  • Anybody wanna be friends
    13·2 answers
  • Provide one to two strategies you might incorrect to ensure effectiveness of persuasive message in business.
    13·1 answer
  • Between 2000 and​ 2020, the U.S. government budget deficit
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!