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astra-53 [7]
3 years ago
14

The free cash flow to the firm is $300 million in perpetuity, the cost of equity equals 14%, and the WACC is 10%. If the market

value of the debt is $1 billion, what is the value of the equity using the free cash flow valuation approach?
Business
1 answer:
mixas84 [53]3 years ago
4 0

Answer:

$2 billion

Explanation:

For computing the value of equity, first we have to determine the total equity firm which is shown below:

Total equity value = Free cash flow to the firm ÷ WACC

                             = $300 million ÷ 10%

                             = $3 billion or 3,000 million

Now the value of the equity would be

= $3 billion - $1 billion

= $2 billion

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3 years ago
A portfolio of stocks may achieve diversification benefits if the stocks that comprise such portfolio are:____.
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2 years ago
Ralph Young was a commercial tour boat operator on the northern coast of Kauai, Hawaii. He was licensed by the state of Hawaii t
Y_Kistochka [10]

Answer:

The correct answer is option (a) The court probably found that the state law was unconstitutional under the supremacy cause.

Explanation:

Solution

From the given questions it states that, What would be the court's most likely response to Ralph's lawsuit.

The court's decision response would be that, I that when the situation arises or occurs in that case, where there is a conflict which arises between federal and state law then in that case federal law must be applied.

7 0
3 years ago
ABC Company sold the rights to use one of their patented processes that will result in them receiving cash payments of $10,000 a
BigorU [14]

Answer:

$77,217

$11,289

Explanation:

Fist we will calculate the present value of $10,000 payment

A fix Payment for a specified period of time is called annuity. The discounting of these payment on a specified rate is known as present value of annuity. The value of the annuity is also determined by the present value of annuity payment.

Formula for Present value of annuity is as follow

PV of annuity = P x [ ( 1- ( 1+ r )^-n ) / r ]

Where

P = Annual payment = $10,000

r = rate of return = 10% / 2  = 5%

n = number of period = 5 years x 2 semiannual payments per year = 10 payments

PV of annuity = $10,000 x [ ( 1- ( 1+ 0.05 )^-10 ) / 0.05 ]

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PV = FV x ( 1 + r )^-n

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PV = $11,289

6 0
4 years ago
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muminat

Answer:

A. True

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