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Inessa [10]
3 years ago
11

Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management pl

ans to maintain debt at 21% of the company’s present value, and you believe that at this capital structure the company’s debt holders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next year’s operating cash flow (depreciation plus profit after tax at 40%) will be $59 million and that investment in plant and net working capital will be $21 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year. a. What is the total value of Icarus? (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole dollar amount.)
Business
1 answer:
LUCKY_DIMON [66]3 years ago
7 0

Answer:

Icarus total value: 478,459,899

Explanation:

We will calcualte the WACC to know the cost of capital for the company:

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

Ke 0.14

Equity weight 0.79

Kd 0.07

Debt Weight 0.21

t 0.4

WACC = 0.14(0.79) + 0.07(1-0.4)(0.21)

WACC 11.94200%

Now we calcualte the value of the company:

\frac{FCF}{return-growth} = Intrinsic \: Value

59,000,000

<u> (21,000,000) </u>

38,000,000 Free Cash flow ofthe Firm

\frac{38,000,000}{0.11942-0.04} = Intrinsic \: Value

\frac{38,000,000}{0,07942} = Intrinsic \: Value

Value: 478.468.899

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On June 2nd, SEAkayak had the following details for its common stock: 1,000,000 shares authorized, 400,000 shares issued, and 40
kompoz [17]

Answer:

The authorized common stock shares remain 1,000,000 shares.

Explanation:

The authorized shares are not affected by movements in the shares, like issue of shares, repurchase, and resale of treasury stock shares.  The authorized shares, therefore, represent the number of shares that the company is legally bound to issue without exceeding.  The implication is that the company is free to issue shares less than or equal to the authorized shares, but it may not issue more than the authorized until it obtains a new authorization.

The movements are accounted for in separate accounts called Issued Common Stock Account and Treasury Stock Account.  The treasury stock account is a contra account to the Common Stock.

3 0
3 years ago
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one−time−only special order for a product similar
valentina_108 [34]

Answer:

the minimum acceptable price of this special​ order is $410.

Explanation:

Minimum acceptable price for the special order is the price that gives a Incremental<em> contribution margin of zero</em> or <em>a price that covers all costs related to supporting the special offer</em>.

Since the company has <em>excess capacity</em>, ignore the fixed costs as these are irrelevant for this decision

Costs to Provide for the Special Offer : Minimum acceptable price

Direct materials                           $150

Direct labor                                   $60

Manufacturing support               $105

Marketing costs                            $95

Minimum acceptable price         $410

6 0
3 years ago
Investors select a stock based on the cash they expect to receive from that stock. that cash comes in the form of?
mylen [45]

Investors select a stock based on the cash they expect to receive from that stock. that cash comes in the form of a and b.

Investors are usually different from traders. Investors invest capital for long-term gains, while traders buy and sell securities repeatedly in pursuit of short-term gains. Investors typically generate income by investing capital in either stocks or debt.

So how does an investor choose which stocks to buy?He has two main investment styles: active and passive. Active investors try to outperform the market by buying stocks that they believe are undervalued, with the intention of selling when the stock price rises.

Stock pick. An active portfolio management approach that focuses on a favorable selection of specific stocks rather than broad asset allocation.

Learn more about stock here: brainly.com/question/25818989

#SPJ4

The question is incomplete. Please read below to find the missing content.

Investors select a stock based on the case they expect to receive from that stock. That cash comes in the form of ____.

a. Dividends

b. The future sales price.

c. Interest payments.

d. Commissions.

7 0
2 years ago
Đề xuất 1 chiến lược cạnh tranh phù hợp cho công ty cổ phần bia rượu Sài Gòn SABECO
enot [183]

Can't you write in English^_^

8 0
3 years ago
A common measure of liquidity is a.the accounts receivable turnover. b.dividends per share of common stock. c.the asset turnover
krek1111 [17]

Answer:

The correct answer is letter "A": the accounts receivable turnover.

Explanation:

The liquidity of an asset reflects the ease with which it can be transformed into cash. The Receivables Turnover Ratio is an accounting measure used to quantify the effectiveness of the firm in both extending credits and collecting debt out of the company's sales. The Receivables Turnover Ratio is calculated by <em>dividing the net sales by the average accounts receivable</em>.

5 0
4 years ago
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