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
Phoenix [80]
3 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]3 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

You might be interested in
When a scientific number is the result of a measurement using equipment such as a balance, the last digit is ______?
zhuklara [117]
The answer is <span>the last digit is "estimated".
</span>
The Scientific notation or configuration shows a number in exponential notation, by replacing some portion of the number with E+n, where E (which remains for Exponent) duplicates the first number by 10 to the nth power. For instance, a 2-decimal Scientific notation shows 12345678901 as 1.23E+10, which is 1.23 times 10 to the tenth power. Hope this helps!
5 0
3 years ago
What are the pros and cons of the JIT Strategy in company’s operation ?
Fudgin [204]

Answer:

Just-in-time (JIT) inventory systems started in Japan in the 1970s and spread to the U.S. about a decade later. JIT is an inventory-management system that aims to help businesses have just enough inventory readily available to meet current demand while avoiding excess. There are many pros and cons for a small business to consider before adopting a JIT system.

4 0
3 years ago
If the Commerce Department adjusts the growth rate of GDP downward for the first quarter of 2016, and the Bureau of Labor Statis
wlad13 [49]

Answer:

Downward rate

Explanation:

The commerce department has adjusted the growth of GDP downward, and BLS has adjusted the labor working hours upward. The bureau of labor statistics has to report a downward trend in terms of growth of labor productivity for the first quarter of 2016. The downward trend in labor productivity growth will justify the decline in GDP growth.

4 0
3 years ago
Which approach suggests that a manager believes that employees should be involved in both defining problems and in designing the
morpeh [17]

According to McGregor's Theory Y method, a manager might think that workers ought to be involved in both problem-solving and problem-definition.

One of the theories that has a significant impact on both management and employees is McGregor's theory. Additionally, McGregor's descriptions of two different theories, namely Theory X and Theory Y, are further explained below along with each theory's central tenets.

According to Theory Y, a manager's positive perception of their team problem-solving members will increase employee motivation. Managers erroneously McGregor's Theory Y believe that a decentralized approach that strengthens teamwork, collaboration, and trust can address employee demotivation.

Contrary to Theory X, this theory holds that managers do not believe that  problem-solving control motivates workers. The team members must be motivated by McGregor's Theory Y meeting their needs for social interaction, self-actualization, and self-esteem.

Learn more about McGregor's Theory Y  here

brainly.com/question/28624869

#SPJ4

6 0
1 year ago
What type of college would you need to attend to become a veterinarian?
pochemuha
<span><span><span>Here are the best schools:
#1 Overall Score: </span>University of California—​Davis Davis, CA GPA: 4.5
</span><span><span>#2 Overall Score: </span>Cornell University Ithaca, NY4.1
</span><span><span>#3 Tie Overall Score: </span>Colorado State University Fort Collins, CO </span></span>GPA: <span><span>3.9
</span><span><span>#3 Tie Overall Score: </span>North Carolina State University Raleigh, NC </span></span>GPA: 3.9
5 0
3 years ago
Other questions:
  • Taxpayers have a choice of deducting the standard deduction or their itemized deductions. Therefore, ________ AGI deductions are
    11·1 answer
  • 1. Select why manufacturers use a predetermined overhead rate to apply manufacturing overhead to their jobs. (You may select mor
    15·1 answer
  • Zhao Co. has fixed costs of $390,600. Its single product sells for $181 per unit, and variable costs are $119 per unit. If the c
    14·1 answer
  • A flower distributor asked the Fresh Farms sales representative if the company had any red roses in stock. The sales representat
    14·1 answer
  • Equipment is a(n) _____________ account. It is reported on the _____________ side of the accounting equation and is ____________
    13·1 answer
  • You just won the lottery, which promises you $260,000 per year for the next 20 years, starting today (annuity due). If your disc
    11·1 answer
  • Jamison Company uses the total cost method of applying the cost-plus approach to product pricing. Jamison produces and sells Pro
    9·1 answer
  • When it comes to the field of marketing, which of these activities is associated with logo design?
    8·1 answer
  • At a price of $2,000 per unit, the demand for Rancho 60 mountain bikes from Peyton Bike's Inc. is 300 units, which is the number
    5·1 answer
  • After obtaining the dried weight of your product, you ran two irs. One of them is of the product. Briefly explain which was the
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!