Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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FV of multiple cash flows: International Shippers, Inc., have
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- Suppose Leonard, Nixon, & Shull Corporation’s projected free cash flow (FCF) for next year is $750,000, and FCF is expected to grow at a constant rate of 4% indefinitely. If the company’s weighted average cost of capital is 10%, what is the value of its operations? a. $18,750,000 b. $12,500,000 c. $7,500,000 d. $13,000,000 e. $10,833,333arrow_forwardYoung & Liu Inc.'s free cash flow during the just-ended year (t = o) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions? a. $998 O b. $1,050 Oc$1,158 Od. $948 Oe. $1,103arrow_forwardQ1. Acme Corp. is expected to generate a free cash flow (FCF) of $9,080.00 million this year (FCF₁ = $9,080.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF₄). Assume the firm has no non-operating assets. If Acme Corp.’s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Acme Corp.? (Note: Round all intermediate calculations to two decimal places.) a. $150,504.74 million b. $27,141.27 million c. $204,104.42 million d. $180,605.69 million Q2. Acme Corp.’s debt has a market value of $112,879 million, and Acme Corp. has no preferred stock. If Acme Corp. has 225 million shares of common stock outstanding, what is Acme Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two…arrow_forward
- Find the present value of the following stream of a firm's cash flows, assuming that the firm's opportunity cost is 8%. End of year Cash flow 1 2 3 $5,000 $25,000 $14,000arrow_forwardCalculate the following from the information given Fego Ltd:1. Payback Period (expressed in years, months and days).2. Accounting Rate of Return on initial investment (expressed to two decimal places).3. Internal Rate of Return (expressed to two decimal places) if the net cash inflows are R400 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.arrow_forwardA company is projected to generate revenues of $336 million and $406 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 35.4%. Forecasted tax rate: 22.2%. Forecasted reinvestment rate: 30%. Forecasted steady growth rate of free cash flow: 1.3% per year. Cost of capital: 13.2%. Debt: $40 million. Cash: $35 million. Shares outstanding: 12 million.arrow_forward
- Pena Company is considering an investment of $30,455 that provides net cash flows of $9,400 annually for four years. (a) If Pena Company requires a 7% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) (b) Based on net present value, should Pena Company make this investment? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of this investment? Years 1-4 Net present value Net Cash Flows X PV Factorarrow_forwardVeggie Burgers, Inc. would like to maintain its cash account at a minimum level of $247,000 but expects the standard deviation in net daily cash flows to be $12,200, the effective annual rate on marketable securities to be 4.9 percent per year, and the trading cost per sale or purchase of marketable securities to be $28.50 per transaction. What will be its optimal cash return point? (Use 365 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) Optimal cash return pointarrow_forwardThe Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Year 1 $250,000 Annual Cash Flows Year 2 $20,000 Year 3 Year 4 $180,000 $450,000 Year 5 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?arrow_forward
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