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LuckyWell [14K]
3 years ago
10

Gonzales Corporation generated free cash flow of $86 million this year. For the next two years, the company's free cash flow is

expected to grow at a rate of 10%. After that time, the company's free cash flow is expected to level off to the industry long-term growth rate of 4% per year. If the weighted average cost of capital is 11% and Gonzales Corporation has cash of $100 million, debt of $275 million, and 100 million shares outstanding, what is Gonzales Corporation's expected current share price
Business
1 answer:
Viktor [21]3 years ago
7 0

Answer:

$12.49

Explanation:

The computation of the expected current price is shown below:

But before that first we have to determine the current firm value which is

Current firm value = ($86 million ×1.10^1) ÷ 1.11^1 + ($86 million × 1.10^2) ÷ 1.11^2 + {($86 million × 1.10^2 × 1.04) ÷ (0.11 - 0.04)} ÷ 1.11^2

= $1,424.48 million

Now

Expected current share price is

= ($1,424.48 - $275 million + $100 million) ÷ 100 million shares outstanding

= $12.49

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Suppose the rate of return on a 10-year T-bond is 4.05%, the expected average rate of inflation over the next 10 years is 2.0%,
Keith_Richards [23]

Answer:

1.15%.

Explanation:

This can be calculated as follows:

Yield be on a 10-year TIPS = Rate of return on the 10 year T-bond - Average Inflation - Market Risk Premium (MRP)

Therefore, we have:

Yield be on a 10-year TIPS = 4.05% - 2.0% - 0.9% = 1.15%

Therefore, the yield on a 10-year TIPS should be 1.15%.

6 0
3 years ago
Baxter Company produces​ children's wiffle ball sets using a threeminusstep sequential process that includes​ molding, coloring
anyanavicka [17]

Answer:

C) WIP InventoryWIP Inventory-Finishing

Explanation:

Cost of WIP is transferred through Molding to Coloring to the last process of the production finishing. After completing the finishing the balls are ready and the cost is transferred from WIP InventoryWIP Inventory-Finishing to Finished goods Inventory. So, the correct answer is C) WIP InventoryWIP Inventory-Finishing.

5 0
3 years ago
Arctic Air Inc. manufactures cooling units for commercial buildings. The price and cost of goods sold for each unit are as follo
hammer [34]

Answer:

See below

Explanation:

Activity rate = Overhead costs/Estimated driver

Customer service : 175 per serv. req.

Project bidding : 400 per bid

Engineering support : 750 per design change

Activity costs allocated = Activity rate × Driver consumed

Activity costs

Gough industries. 39,800

Been inc. 47,150

The Martin group. 139,300

Artic Air inc.

Customer profitability report for the year ended, December 31

Gough industries Been inc. Martin Grou

Revenues

1,800,000 960,000 240,000

Cost of goods sold

840,000 448,000 112,000

Gross profit

960,000 512,000 128,000

Selling and administrative activities:

Customer service

6,300 4,900 20,300

Project bidding

20,000 16,000 38,000

Engineering support

13,500 26,250 81,000

Total selling and administrative support

39,800 47,150 139,300

Operating income(loss)

920,200 464,850 (11,300)

3 0
3 years ago
True or False
Ilya [14]
False lolllll I have to write more
6 0
2 years ago
Which statement(s) most directly apply to capitalism? i. there is heavy government regulation of industry. ii. individuals can s
Kisachek [45]

The most directly applied sentence for capitalism is the price and availability of goods are determined primarily by the market. As the market is a free market in the economy.

<h3>What is Capitalism?</h3>

Capitalism is commonly thought of as an economic system in which private actors own and control the property.

According to their own interests, demand and supply freely set market prices in ways that benefit society.

 

Thus, option D which is iii only is correct.

For further details about capitalism refer to this link:

brainly.com/question/414301

3 0
2 years ago
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