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user100 [1]
3 years ago
15

Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 wi

ll be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?
Select one:
a. $158
b. $167
c. $175
d. $184
e. $193
Business
1 answer:
Gwar [14]3 years ago
3 0

Answer:

correct option is b. $167

Explanation:

given data

free cash flow FCF 1 = -$10 million

t = 1

free cash flow FCF 2= $20 million

t = 2

FCF grow rate = 4%

average cost of capital = 14%

to find out

what is the firm's value of operations

solution

first we get here firm value in year 2 that is express as

firm value in year 2 = expected FCF in 3 ÷ (cost of capital - growth)    .........1

put here value

firm value in year 2 = \frac{20*(1+0.04)}{0.14 - 0.04}

firm value in year 2 = 208 million

and

firm value of operation this year will be as

firm value = discounted value in year 2 + discounted FCF1 and FCF2     .............2

firm value = \frac{208}{(1+0.14)^2} +\frac{20}{(1+0.14)^2} +\frac{-10}{(1+0.14)}

firm value = 166.67 = 167 million

so correct option is b. $167

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lesantik [10]

Answer:

<em>C. $0 dividend income and a tax basis in the new stock of $56.25 per share</em>

Explanation:

Existing tax basis

= 300 shares * $90

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Therefore the total number of shares will be, after dividend,

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So new tax basis per share

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7 0
3 years ago
One appraisal principle of value is based on the concept that the more a property or its components are in harmony with the surr
mario62 [17]

Answer:

Conformity

Explanation:

Conformity is an appraisal principle which states that the accurate value of a property tends to be created and then prolonged in a situation where the various features of the property meets up with the different demands of the market.

The basic principle of conformity describes how a particular property is suitable to be located in its surrounding. This is the main reason why different houses are built in the same pattern as the other houses situated in the area. This therefore increases the value of the property.

7 0
3 years ago
Help me and I will give you 30 Brainliest if your answer is correct.
kotegsom [21]

Answer:

She could work as a trash person, taking garbage out and destroying it. She could work as a chef, cooking food for hungry people. She could be a homeless shelter worker, and help people find homes.

Explanation:

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Hope this helps! Plz mark as brailiest!

5 0
3 years ago
Carlos Landry finds he has less and less energy to go to work each day. On average he misses two days a week. Carlos may be suff
Zarrin [17]

Answer:

C. Job specialization

Explanation:

Employees boredom is one of the disadvantages of job specialization

Job specialization: This can be defined as a situation where an employee focuses on a particular skills or job position in order to become an expert.

Job specialization is as a result of division of labor. Division of labor is the sharing of roles or functions among employees in a firm so as to Improve productivity.

When a particular role is assigned to an employee for a long period of time, the employee becomes an expert as a result of that.

Advantages of job specialization

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• More expertise is developed through job specialization

Disadvantages of job specialization

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• There is fear of job security for the workers. They often wonder what will happen if a firm finds a replacement for them.

7 0
3 years ago
The nominal exchange rate is A. the difference between the interest rate in one country and the interest rate in another country
Veronika [31]

Answer:

Option (B) is correct.

Explanation:

The nominal exchange rate refers to the rate at which there is a buying and selling of goods and services among the countries. It is the amount of home currency that are needed to purchase a unit of foreign currency.

For example: A resident of India would need 75 Indian rupees to purchase a dollar of United States. Therefore, the nominal exchange rate between the India and the United States is as follows:

1 US dollar = Rs. 75

5 0
3 years ago
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