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Phoenix [80]
4 years ago
6

River Enterprises has ​$502 million in debt and 22 million shares of equity outstanding. Its excess cash reserves are $ 15 milli

on. They are expected to generate ​$195 million in free cash flows next year with a growth rate of 2​% per year in perpetuity. River​ Enterprises' cost of equity capital is 13​%. After analyzing the​ company, you believe that the growth rate should be 3​% instead of 2​%. How much higher​ (in dollars) would the price per share be if you are​ right? g
Business
1 answer:
Sedbober [7]4 years ago
4 0

Answer:

The stock price would be higher by $7.37

Explanation:

Free cash flow to equity = 195 million with a growth rate of 2% in perpetuity

Value of equity = Free cash flow to equity ÷ (Ce -g) = 195 million ÷ (13% - 2%)

= 190 ÷ 0.11 = $1,772,727,272.73 = $1,773 million

If growth rate is 3%, value of equity = 195 ÷ (13%-3%) = 195 ÷ 0.1 = $1,950  million

a. Value of stock = (1,773 + 15) million ÷ 22 = $81.27

b. Value of stock with 3% = 1,950 ÷ 22 = $88.64

Thus stock price would be higher by = b-a = $7.37

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In newspaper advertising, ________ advertising includes copy, illustrations or photos, headlines, coupons, and other visual comp
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Answer: Display

Explanation: Display advertising is a form of commercial solicitation that is made to sell some commodity, service or similar and is typically designed as an image or a photo. As such, it employs the use of visuals like images, copy, illustrations or photos, headlines, coupons, videos and other visual components on the networks of publishers.

7 0
3 years ago
Brianna was a veteran manager and had been with the company for several years when she got promoted to the​ company's flagship o
Kitty [74]

Answer:

In the restaurant business, self inspections can help you ensure that the food is always safe for your customers (better quality food) , lower the overall costs of the restaurant and helps to increase your reputation (a clean restaurant is always seen as a better restaurant).

Self inspection doesn't mean that the manager herself has to carry out the inspection, another employee can. Self inspection refers to making sure you comply with all regulations without having an inspector come and evaluate your restaurant. Self inspections will help the restaurant get higher inspection scores, and that was one of Brianna's major accomplishments.

8 0
4 years ago
Elton used a decision rule that says, "only buy well-known brand names" when selecting a television set. he did not look at pric
anzhelika [568]

Answer: C) noncompensatory rule

Explanation:

The non-compensatory rule is used to describe a situation where a person does not believe that the good traits of a product in one area will compensate for perceived bad traits in another area.

For Elton, the good trait is well known brand names and the bad trait is brand names that are not well known. Even if for the brand that is not well known, the price is lower, the discount is higher or the store is well known, these still will not be enough to compensate for the bad trait of not being well known.  

3 0
3 years ago
Elisa was involved in three auto accidents this year. Even though none was her fault, her insurance company increased her rates.
Ket [755]

Your insurance carrier might have to raise your rates to pay for the vehicle's damage or medical if a person involved needs it.

5 0
3 years ago
An author just signed a lucrative contract with a publisher that offers to pay her the amount of $500 at the end of year 9 when
solong [7]

Answer:

Ans. The annuity that will be equivalent to the publisher´s advance would be $26.40 per year, for 9 years at 7% interest rate.

Explanation:

Hi, first, let´s bring that $500 to be paid in 9 years to present value, we need to use the following formula.

PresentValue=\frac{FutureValue}{(1+r)^{n} }

Where: r is our discount rate (7%) and n the periods from now when she will receive that $500 amount. This should look like this.

PresentValue=\frac{500}{(1+0.07)^{9} } =271.97

Ok, so the equivalent amount of money today of those $500 in nine years is $271.97, but the author wants $100 today so the remaining amount has to be used to find the equal annual payments to be made in order to be equivalent to re remaining balance ($171.97). We now need to use the following equation.

Present Value=\frac{A((1+r)^{n}-1 )}{r(1+r)^{n} }

And we solve for "A" like this

171.97=\frac{A((1+0.07)^{9}-1 )}{0.07(1+0.07)^{9} }

171.97=\frac{A(0.838459212 )}{0.128692145}

171.97=A(6.515232249)

A=\frac{171.97}{6.515232249} = 26.40

Therefore, the equivalent amount of money of $500 in 9 years is $100 today and $26.40 every year, at the end of the year, for nine years.

Best of luck.

4 0
3 years ago
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