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scZoUnD [109]
3 years ago
11

Ted Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash fl

ows are expected to grow at a constant rate of 5 percent per year forever. If the firms average cost of capital is 15 percent, the market value of the firms debt is $500,000, and Nico has a half million shares of stock outstanding, what is the value of Ted stock?
Business
1 answer:
wariber [46]3 years ago
7 0

Answer:

The value of Ted stock is $2.43

Explanation:

Free cash flow From Year 1 to 5 = $200000

Cash Flow Year 6 = 200000*1.05

                              = $210000

This cash flow is expected to grow forever, so the terminal value can be caluclated at Year 5 of the above perptuity by Gordon Growth model

Terminal Cash FLow Value at Year 5 = 210000/(15% - 5%)

                                                              = $2100000

Present Value of above stream

= 200000*PVIFA(5 yr, 15%) + 2100000*PVIF(5 yr, 15%)

= $200000*3.352 + $2100000*0.497

= $1714100  

Value of equity = Present Value of Firm - Value of debt

                          = $1714100 - $500000

                          = $1214100  

Number of shares = 500000

Value per share = $1214100/500000

                           = $2.43

Therefore, The value of Ted stock is $2.43

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Answer:

Self-Fulfilling Prophecy

Explanation:

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7 0
3 years ago
In economics, another term for satisfaction is marginal productivity. income elasticity. utility. price elasticity.
Feliz [49]

Answer:

Utility

Explanation:

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3 years ago
What type of control focuses on measuring a company’s products territories, customer groups, segments, trade channels, and order
suter [353]
The right answer for the question that is being asked and shown above is that: "Activity." The type of control focuses on measuring a company’s products territories, customer groups, segments, trade channels, and order sizes to help expand or eliminate any products or marketing activities is called the <span>Activity </span>
7 0
3 years ago
Annual maintenance costs for a particular section of highway pavement are $2500. The placement of a new surface would reduce the
rewona [7]

Answer:

The maximum investment is $6,360.111

Explanation:

Giving the following information:

The placement of a new surface would reduce the annual maintenance cost to $500 per year for the first 3 years and to $1000 per year for the next 7 years. After 10 years the annual maintenance would again be $2500.

We need to find the net present value. The maximum initial investment will be the amount that makes the NPV cero.

NPV=∑[Cf/(1+i)^n]

Cf= cash flow

<u>For example:</u>

Year 1= 500/1.05= 476.19

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Vilka [71]

Answer:

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By doing the promotion in a television could be beneficial for the company as most of the audience are habitual to see the television and ofcourse many of them could aware of the company product by seeing the attractive schemes that ultimately benefit to the company and the customers

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8 0
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