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[xii]. Mooradian Corporation’s free cash flow during the just-ended year (t = 0) was $150 million, and its FCF is expected to grow at a constant rate of 5.0% in the future. If the weighted average cost of capital is 12.5%, what is the firm’s value of operations, in millions?

[xiv]. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell?

*$37.52*
*$1,259*
[xxi]. Gupta Corporation is undergoing a restructuring, and its free cash flows are expected to vary considerably during the next few years. However, the FCF is expected to be $65.00 million in Year 5, and the FCF growth rate is expected to be a constant 6.5% beyond that point. The weighted average cost of capital is 12.0%. What is the horizon (or terminal) value (in millions) at t = 5?

*$821*
[xxii]. Misra Inc. forecasts a free cash flow of $35 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, what is the horizon, or terminal, value in millions at t = 3?

*$43.33*
*You have been assigned the task of using the corporate, or free cash flow, model to estimate Petry Corporation's intrinsic value. The firm's WACC is 10.00%, its end-of-year free cash flow (FCF*_{1}) is expected to be $75.0 million, the FCFs are expected to grow at a constant rate of 5.00% a year in the future, the company has $200 million of long-term debt and preferred stock, and it has 30 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of CS?

*$210.53*
*$1,456*
__Year 1 2 __

Free cash flow -$50 $100
*$386.13*
__Year 1 2 3 __

FCF -$15.0 $10.0 $40.0
*$450*
[xxviii]. Based on the corporate valuation model, Wang Inc.’s value of operations is $750 million. Its balance sheet shows $100 million notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm’s value of equity, in millions?

*$24.33*
[xxix]. Based on the corporate valuation model, Gay Entertainment's value of operations is $1,200 million. The company’s balance sheet shows $120 million of notes payable, $300 million of long-term debt, $50 million of preferred stock, $180 million of retained earnings, and $800 million of total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of its price per share?

*$27.20*
[xxx]. Based on the corporate valuation model, the value of Chen Lin Inc.’s operations is $900 million. Its balance sheet shows $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of its stock price per share?

*$14.00*
[xxxi]. Based on the corporate valuation model, Morgan Inc.’s value of operations is $300 million. The balance sheet shows $90 million of notes payable, $30 million of long-term debt, $40 million of preferred stock, and $100 million of common equity. The company has 10 million shares of stock outstanding. What is the best estimate of the stock’s price per share?

*8.89%*
*7.47%*
*$44.87*
*Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in earnings and dividends to zero, i.e., g = 0. The company’s last dividend, D*_{0}, was $1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
*$42.64*
*$37.05*
*$33.50*
__Year 1 2 3 __

Free cash flow -$20.00 $48.00 $54.00

[i]. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is r_{s} = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?

a

[ii]. A stock just paid a dividend of D_{0} = $1.50. The required rate of return is r_{s} = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?

e

[iii]. A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price?

a. $16.28 b. $16.70 c. $17.13 d. $17.57 e. $18.01
d

[iv]. If D_{1} = $1.25, g (which is constant) = 4.7%, and P_{0} = $26.00, what is the stock’s expected dividend yield for the coming year?

d

[v]. If D_{0} = $2.25, g (which is constant) = 3.5%, and P_{0} = $50, what is the stock’s expected dividend yield for the coming year?

b

[vi]. If D_{1} = $1.50, g (which is constant) = 6.5%, and P_{0} = $56, what is the stock’s expected capital gains yield for the coming year?

a

[vii]. If D_{1} = $1.25, g (which is constant) = 5.5%, and P_{0} = $44, what is the stock’s expected total return for the coming year?

e

[viii]. If D_{0} = $1.75, g (which is constant) = 3.6%, and P_{0} = $32.00, what is the stock’s expected total return for the coming year?

e

6.65%

_{1} = $1.25). The stock sells for $32.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

$41.69

_{s}, is 9.00%. What is the stock's expected price 3 years from today?

$44.46

_{s}, is 11.50%. What is the stock's expected price 5 years from now?

$2,100

$2,850,000

_{1} = $150,000, and FCF is expected to grow at a constant rate of 6.5%. If the company’s weighted average cost of capital is 11.5%, what is the value of its operations?

$115.38

$28.90

_{1} = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?

$18.62

__just paid__ a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P_{0}?

$14.52

__just paid__ a dividend of D_{0} = $0.75 per share, and that dividend is expected to grow at a constant rate of 6.50% per year in the future. The company's beta is 1.25, the required return on the market is 10.50%, and the risk-free rate is 4.50%. What is the company's current stock price?

$1.05

__last__ dividend, D_{0}?

$2.44

_{1}?

[xx]. Sorenson Corp.’s expected year-end dividend is D_{1} = $1.60, its required return is r_{s} = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is *?*

_{1}) is expected to be $27.50 million, and it is expected to grow at a constant rate of 7.0% a year thereafter. The company’s WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?

$43.33

_{1} = -$10 million, but it expects positive numbers thereafter, with FCF_{2} = $25 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14.0%, what is the firm’s value of operations, in millions?

[xxvi]. Kale Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11.0% and FCF is expected to grow at a rate of 5.0% after Year 2, what is the Year 0 value of operations, in millions?

Free cash flow -$50 $100

[xxvii]. Ryan Enterprises forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13.0%, and the FCFs are expected to continue growing at a 5.0% rate after Year 3. What is the Year 0 value of operations, in millions?

__nominal__ (not effective) annual rate of return?

__effective__ annual (not nominal) rate of return?

_{0} = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock’s current market value?

$29.05

_{s}) is 12%. What is the best estimate of the current stock price?

_{s}) is 12.0%. What is the best estimate of the current stock price?

_{s}) is 11%, what is its current stock price?

Too big

Why no 39?

$2,789.47

Wall Inc. forecasts that it will have the free cash flows (in millions) shown below. If the weighted average cost of capital is 14% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions?

Free cash flow -$20.00 $48.00 $54.00

6.34%

_{4} = $1.00(1.30)^{4} = $2.8561. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock’s expected constant growth rate after t = 4, i.e., what is X?

About this deck

Author: Brent B.

Created: 2011-10-26

Updated: 2011-12-14

Size: 41 flashcards

Keywords: flash card flashcards digital flashcards note sharing notes textbook wiki college dorm class classroom exam homework test quiz university college education learn student teachers tutors share, study blue studyblue studyblu

Views: 359

Created: 2011-10-26

Updated: 2011-12-14

Size: 41 flashcards

Keywords: flash card flashcards digital flashcards note sharing notes textbook wiki college dorm class classroom exam homework test quiz university college education learn student teachers tutors share, study blue studyblue studyblu

Views: 359

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