A company is expected to have free cash flows of $0.75 million next year. The weighted average cost of capital is WACC = 10.5%,
1 answer:
Answer:
The stock's current intrinsic price is c. $18.29
Explanation:
Hi, by definition, the intrinsic value of a stock is defined by the present value of its future free cash flows, in our case, for the next year it will be $0.75 million and it will grow at a 6.4% rate, every year, "forever".
SInce there are $2 million in short term investment and $2 million in debt, both amounts cancel out each other therefore, all we have to do is to bring to present value the future free cash flows, as follows.
So the value of all the outstanding share of the company is:
Since there are 1 million shares, each one is worth $18,292,683/1,000,000= $18.29. So the answer is c.
Best of luck.
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Answer:
The cost of an slice of pizza is $3.94
Explanation:
Hi, we have to construct 2 equations with the information of the problem, the first one is " 8 slices of pizza and 7 soft drinks for $45.10".
And the second one, when "The second group bought 6 slices of pizza and 5 soft drinks for $33.34" is.
Where: P = pizza slices and D= soft drinks
We need to substract one equation from the other, but firs we need to equal one of the variables. In order to do so, we multiply our first equation by 5 and the second one for 7, therefore we get.
First equation
And the second one:
And now, we substract them and solve.
The cost of a slide of pizza is $3.94
In case you needed to find the cost of the soft drink, we just substitute P for 3.94 in any of the initial equations, that is:
The cost of a soft drink is $1.94
Best of luck.