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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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bagirrra123 [75]

Answer:

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It is mostly the women between 25 and 54 years of age who watch the lifestyle channels owned by Scripps Networks Interactive, an
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Explanation:

In the question above the women between the age of 25-54 years are the Target Audience because the interactives and the advertisement  on the Scripps network are aimed at these women's.

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