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
Vanyuwa [196]
3 years ago
7

You must estimate the intrinsic value of Lowell Technologies’ stock. The end-of-year free cash flow (FCF1) is expected to be $30

million, and it is expected to grow at a constant rate of 5.0% a year thereafter. The company’s WACC is 8.0%, it has $200 million of long-term debt, and there are 20.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock? $34.00 $36.00 $38.00 $40.00 $42.00
Business
1 answer:
Hunter-Best [27]3 years ago
8 0

Answer:

Firm's estimated intrinsic value per share of common stock = $40.00

Explanation:

Intrinsic value:

Intrinsic value is a way of describing the perceived or true value of an asset.

Formula:

Intrinsic value = free cash flow / required rate - growth rate

As the end-of-year free cash flow (FCF1) = $30  and it is expected to grow at a constant rate of 5.0% a year thereafter.

so FCF2 = 30 (1 + 5%)

FCF2 = 31.5

Value at year 1 = FCF2 / required rate - growth rate

Therefore by putting the values in the above formula, we get

Value at year 1 = 31.5 / 0.08 - 0.05

Value at year 1 = 31.5 / 0.03

Value at year 1 = 1,050

As the company’s WACC is 8.0%, so

Value today = 30 / (1 + 0.08)1 + 1,050 / (1 + 0.08)1

Value today = $1,000 million

As stated in the question it has $200 million of long-term debt, and there are 20.0 million shares of common stock outstanding.

Intrinsic value = (1,000 - 200) / 20

Intrinsic value = $40.00

You might be interested in
Can someone explain the relationship between consumer expectations and economic performance?
maks197457 [2]
If a consumer believes that the price of the good will be higher in the future he is more likely to purchase the good now. If the consumer expects that her income will be higher in the future the consumer may buy the good now. In other words positive expectations about future income may encourage present consumption.
5 0
2 years ago
which manufacturing strategy can be described as producing products to put into inventory based on a demand forecast
Gwar [14]

The make-to-stock manufacturing (MTS) strategy can be described as producing products to put into stock based on a demand forecast.

In this strategy, companies do not maintain productive stability over a period of time, but adjust their manufacturing strategy according to times when demand can increase or decrease.

Some advantages of the make-to-stock strategy are:

  • Economy of scale.
  • Waste reduction.
  • Efficiency in the use of resources.
  • Increased response time.

So this is an effective manufacturing strategy for companies that can accurately forecast their demand.

Learn more here:

brainly.com/question/24099922

8 0
2 years ago
CONCILIACIONES BANCARIAS
Nimfa-mama [501]

Answer:

ehejejeuywnfwwjwjwhwjegegjshshstehshstejeheteyejuw7yo was a member in its first two seasons of its own and the first team in its history to win the world series 65in 2of 2in 3733333inches the world cup is in its second season as a team that

5 0
2 years ago
What seems to be the prevailing opinion about enterprise clouds
aleksley [76]
It's used by almost everyone 
6 0
3 years ago
Hibiscus Corporation began operations on January 1, Year 1. On December 15, Year 1, the company received a payment in the amount
mars1129 [50]

Answer:

$12,000

Explanation:

The main difference between cash basis accounting and accrual accounting is that accrual accounting recognizes revenue only after the earning process is completed. On the other hand, cash basis accounting recognizes revenue and expenses when the money is received or paid, regardless of when the service is provided. This is why the US GAAP doesn't allow cash basis accounting.

The IRS allows cash basis accounting for individuals and small businesses that only deal with cash payments, but they must meet certain criteria:

  • partnerships or C corporations with less than $5 million in yearly revenue
  • sole proprietorships and S corporations with less than $1 million in yearly revenues
  • family owned farms
  • you provide personal services and 95% of your revenue comes from it
  • no publicly traded corporation is allowed

4 0
3 years ago
Other questions:
  • A gift of money or goods from the groom or his kin to the bride's kin is referred to as:
    12·1 answer
  • If consumers are willing to pay a higher price than previously for each level of output, we can say that _______ has occurred. A
    9·1 answer
  • Corinne believed in solving issues between managers and employees by talking and finding solutions together, so when a group of
    15·1 answer
  • The company that you work for, mystical jewelry, wants to analyze data that come from other sites, such as measuring where peopl
    13·1 answer
  • Why is finance a matter of general interest and not only individual?
    8·1 answer
  • Assume that on September 1, Office Depot had an inventory that included a variety of calculators. The company uses a perpetual i
    12·1 answer
  • Your study partner is having trouble getting total debits to equal total credits in the trial balance. Trial Balance Accounts De
    9·1 answer
  • What kind of table lists the quantity of a good that a person will buy at different prices?
    9·1 answer
  • Eleanor and Darnell need to decide which one of them will take time off from work to complete the rather urgent task of shearing
    5·1 answer
  • Complex numbers are often used when dealing with alternating current (AC) circuits. In the equation $V = IZ$, $V$ is voltage, $I
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!