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
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles,
garik1379 [7]

Answer:

$876,205.93

Explanation:

Calculation for the value of the Treasury note

FV= 1,000,000

N=3*2

N=6

PMT=3%*1,000,000/2

PMT=30,000/2

PMT= 15,000

I/Y=7.7/2

I/Y= 3.85

Using financial calculator to find the present value of the treasury note

Present Value = $876,205.93

Therefore the present value of the treasury note will be $876,205.93

3 0
3 years ago
Sanborn Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.
Nana76 [90]

Answer:

d) 34.17

Explanation:

we must first calculate the total overhead expenses = $120,000 (ordering and receiving) + $297,000 (machine setup) + $1,500,000 (machining) + $1,200,000 (assembly parts) + $300,000 (inspection) = $3,417,000

since overhead is applied based on direct labor hours, then the predetermined overhead rate = total overhead expenses / total direct labor hours = $3,417,000 / 100,000 labor hours = $34.17 per labor hour

8 0
3 years ago
Business management​
leva [86]

<u>Answer:</u>

Business management is dealing with the coordination and association of business exercises. This usually incorporates the generation of materials, cash, and machines, and includes both advancement and promoting. The management is responsible for sorting out for arranging, controlling, and coordinating the business' assets so they can meet the targets of the approach.

Business Management Tactics are characterized as exercises that observe the business models that were distinguished in the organization's approaches. They put into impact business assignments and plans so they can meet the objectives that have been organized.

7 0
2 years ago
Henrietta is interested in moving her organization toward being a true learning organization. what might be one way in which she
S_A_V [24]
<span>If Henrietta wants to move her organization closer to being a true learning organization, she should redesign the structure. These changes will effect how the company is run and will improve the overall efficiency, productivity, and workflow of the company.</span>
6 0
2 years ago
Wholesale companies need a location that attracts a lot of retail traffic.
Vinvika [58]

Answer:

False

Explanation:

4 0
3 years ago
Other questions:
  • Horrified at the high price for the flu vaccine decides to set a price ceiling at $60.what are the results of this ceiling
    7·1 answer
  • Constraints refer to:
    14·1 answer
  • Being able to refer to trained techniques as opposed to "street-fighting" techniques in reporting a use of force makes it easier
    9·1 answer
  • ______________ insurance covers damage to your vehicle caused by something other than a collision.
    8·1 answer
  • Tom, angela, and peter want to become co-owners of a business enterprise. compare their personal liability for the debts incurre
    5·1 answer
  • Homeowner's fees on condominiums do not include funds to pay:
    7·1 answer
  • While shopping for back-to-school clothes, Josie uses apps on her smartphone to comparison shop, and to obtain coupons and fashi
    9·1 answer
  • Which of the following is a characteristic associated with warehouse showrooms?
    9·1 answer
  • If logan said he won the fight.<br> KSI fans:lets check his monthly spotify listeners
    6·1 answer
  • An investor in able inc. would like to understand able's availability of resources to pay its short-term cash requirements. this
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!