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
Sliva [168]
3 years ago
11

"expects to generate free cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expecte

d to grow at a constant rate of 5 percent per year forever. If the firm’s average cost of capital is 15 percent, the market values of the firm’s debt and preferred stock are $400,000 and $100,000, respectively. There are 125,000 shares of stock outstanding. What is the value of the firm’s stock"
Business
1 answer:
Mumz [18]3 years ago
7 0

Answer:

The value of the firm's stock is $703,920

The price is $5.63 per share ($703,920/125,000 shares)

Explanation:

a) Data and Calculations:

Free cash flows = $200,000

Present value of the free cash flows = $200,000 x Annuity Factor, for 5 years at cost of capital of 15% x (1 + growth rate)

= $200,000 x 3.352 x 1.05

= $703,920

Therefore, common equity = $703,920

To calculate Company XYZ's free cash flows in their present value, they are discounted, using the present value table.  The resulting amount is equivalent to the value of the common stock.  The company's free cash flow is the amount that is left after settling operating expenses and capital expenditure.

You might be interested in
Rage, a leading motor vehicle manufacturer, introduces a new superbike model. it invites proposals from independent dealers who
uysha [10]
<span>This is most likely an example of a franchise opportunity. It could also be considered to be a hybrid type of franchise where the indepenent dealers have more leeway in how the business looks and how it is run. This would be a win/win for many independent dealers as the would still be making most of the local decisions.</span>
6 0
3 years ago
Common stock, par $12 per share, 49,000 shares outstanding. Preferred stock, 8 percent, par $17.5 per share, 7,710 shares outsta
Vlad [161]

Answer:

<h2>a. The Preferred stock is noncumulative.</h2>

Preferred stock

= 7,710 * 17.5 * 8%

= $‭10,794‬

Per share

= 10,794/7,710

= $1.40

Common Shareholders.

= 63,800 - 10,794

= $‭53,006‬

Per share

= ‭53,006‬/49,000

= $1.08

<h2>b. Preferred stock is cumulative. </h2>

This means that if preferred dividends are not paid in a year, they will be accrued and paid when they can.

Preferred stock

= 7,710 * 3 years (2017,2018,2019)

= $‭23,130‬

Per share = 23,130/7,710

= $3

Common stock

= 63,800 - 23,130

= $‭40,670‬

Per share

= 40,670/49,000

= $0.83

c. Why were the dividends per share of common stock less for the cumulative preferred stock than the noncumulative preferred stock?

b. The dividends in arrears on the preferred stock had to be fulfilled before dividends could be paid for the current year.

7 0
3 years ago
If a manufacturing process takes 4 hours per unit of x and 2 hours per unit of y and a maximum of 100 hours of manufacturing pro
lilavasa [31]

Answer:

The algebraic formulation of the constraint is 4X+2Y ≤ 100

Explanation:

The algebraic formulation of the constraint is shown below:

Given that

The number of hours taken per unit of x is 4 hours

And the number of hours taken per unit of x is 2 hours

And, the maximum hours available is 100

Now based on the above information

The  algebraic formulation of the constraint is

= 4X+2Y ≤ 100

hence, the same is to be considered

6 0
3 years ago
Mike just looked at his spending from last month and discovered he spent $120 buying movies. Mike knows that $120 is a lot of mo
navik [9.2K]

Answer:

B

Explanation:

4 0
3 years ago
Read 2 more answers
Which of the following examples is the best demonstration of a qualification profile?​
Ksju [112]

The correct answer is C. Highly motivated IT, college graduate, with software design internship. Experience with Java, XML, and HTML. Logical and systematic problem-solver; capable of independently troubleshooting and performing complex coding tasks.

Explanation:

Qualification profiles should mention the qualifications of a candidate for a specific job or position. This includes information about the education, skills, and even experiences of the individual. Moreover, a qualification profile should be brief and should be written using the third person.

All of these requirements are met only in option C because this includes information about education "IT college graduate", experience "experience with Java, XML..." and relevant skills for this job "problem-solver, capable of independently troubleshooting...". Also, this is brief but still includes more information about qualifications than other options. Finally, this is written using the third person as the author avoids the use of words such as "I".

6 0
2 years ago
Read 2 more answers
Other questions:
  • Riverwalk Corporation is liquidated, with Juan receiving $5,000 in money, other property having a $6,000 FMV, and a $1,000 mortg
    12·2 answers
  • Which of the following is a discrete quantitative variable?
    7·1 answer
  • A company reports the amounts below in its statement of cash flows.
    13·1 answer
  • Limited partnership investors are subject to which of the following risks?I Tax audit riskII Marketability riskIII Legislative r
    8·1 answer
  • If you invest $5,000 at the beginning of each month, howmany months will it take for your account to grow to $250,000
    9·1 answer
  • According to the standard cost card, each helmet should require 0.52 kilograms of plastic, at a cost of $8.00 per kilogram. Requ
    11·1 answer
  • 2. What are mortgage brokers?
    13·1 answer
  • Your project to obtain charitable donations is now 30 days into a planned 40 day project. The project is divided into 3 activiti
    8·1 answer
  • What is your favorite restaurant and why?
    12·2 answers
  • In the short run, a purely competitive seller will shut down if Multiple Choice it cannot produce at an economic profit. there i
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!