FUND. OF FINANCIAL MGMT CONCISE (LL)
9th Edition
ISBN: 9781337539319
Author: Brigham
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 10DQ
Summary Introduction
To calculate: The intrinsic value of the given company.
Introduction:
Intrinsic Value of Stock:
It can be defined as the actual value of the stock of a company after considering all assets whether tangible or intangible which may or may not be as same as the market value of a stock.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Using the information you have collected above, perform calculations to explain to interns as to how the following are calculated:
Free cash flow to firm
Free cash to equity
Value of the firm according to the free cash flow to firm method
Value of the firm according to the free cash flow to equity method
Estimated price of an equity share according to the free cash flow to firm method and the free
cash flow to equity methodNote: Round off the numbers to the nearest integer.
When we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, we
estimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting out
cash?
O a. Cash can be used to pay down debt.
O b.
Cash is easy to value.
O c.
None of the given answers is correct.
The income from cash is not part of EBITDA.
Cash is liquid.
O d.
O e.
Hi, can you help me with this one please. If you have any references, please state it also. Thank you so much :)
1. What is a shareholder wealth maximization? Give a simple analysis whether this is the primary goal of any organization.
2. Using a table, evaluate at least THREE money-market instruments based on risk and rate of return (explain well). Which one would you invest in? Why?
Chapter 9 Solutions
FUND. OF FINANCIAL MGMT CONCISE (LL)
Ch. 9.A - For a stock to be in equilibrium, what two...Ch. 9.A - If a stock is not in equilibrium, explain how...Ch. 9.A - RATES OF RETURN AND EQUILIBRIUM Stock Cs beta...Ch. 9.A - Prob. 2PCh. 9.A - Prob. 3PCh. 9 - It is frequently stated that the one purpose of...Ch. 9 - Is the following equation correct for finding the...Ch. 9 - Prob. 3QCh. 9 - Two investors are evaluating GEs stock for...Ch. 9 - A bond that pays interest forever and has no...
Ch. 9 - Discuss the similarities and differences between...Ch. 9 - This chapter discusses the discounted dividend and...Ch. 9 - DPS CALCULATION Weston Corporation just paid a...Ch. 9 - CONSTANT GROWTH VALUATION Tresnan Brothers is...Ch. 9 - CONSTANT GROWTH VALUATION Holtzman Clothierss...Ch. 9 - NONCONSTANT GROWTH VALUATION Holt Enterprises...Ch. 9 - CORPORATE VALUATION Scampini Technologies is...Ch. 9 - PREFERRED STOCK VALUATION Farley Inc. has...Ch. 9 - Prob. 7PCh. 9 - PREFERRED STOCK VALUATION Earley Corporation...Ch. 9 - PREFERRED STOCK RETURNS Avondale Aeronautics has...Ch. 9 - VALUATION OF A DECLINING GROWTH STOCK Maxwell...Ch. 9 - Suppose you believe that the economy is just...Ch. 9 - Prob. 12PCh. 9 - CONSTANT GROWTH You are considering an investment...Ch. 9 - NONCONSTANT GROWTH Computech Corporation is...Ch. 9 - Prob. 15PCh. 9 - NONCONSTANT GROWTH Carnes Cosmetics Co.s stock...Ch. 9 - CONSTANT GROWTH Your broker offers to sell you...Ch. 9 - NONCONSTANT GROWTH STOCK VALUATION Taussig...Ch. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - NONCONSTANT GROWTH Assume that it is now January...Ch. 9 - Comprehensive/Spreadsheet Problem NONCONSTANT...Ch. 9 - Prob. 23ICCh. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - Prob. 5DQCh. 9 - Prob. 6DQCh. 9 - The required return on equity, rs, is the final...Ch. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQ
Knowledge Booster
Similar questions
- Manny Delgado is interviewing with the Bank of MF for a financial analyst position. The interviewer is interested in knowing whether he understands the EV-to-EBITDA multiple. Delgado explains that the enterprise value is determined by the market value of equity and total debt. He also points out an alternative measure of the enterprise value which considers the free cash flow to the firm. Delgado suggests that we need to subtract the investments on working capital and PPE when calculating the free cash flow to the firm. He further explains the reason we do so is due to the interest tax shield that the investments on working capital and PPE would create. Therefore, by excluding the investments on working capital and PPE, the EV[1]to-EBITDA ratio is not affected by the interest tax shield and is a consistently-defined ratio. Q: Is Delgado’s suggestion on the reason that the investment on working capital and PPE are excluded justifiable? Why?arrow_forwardNizwa investment company is willing to buy the equity shares directly from various companies as they think that buying the shares at the first moment will always give benefits for long timeThe market from where this transaction will be carried out is termed as a.Primary Market b.Regular Market c.Secondary Market d.None of the options A financial statement which shows the status of the worth of a company on a certain date is known as a.Cash flow statement b.Balance Sheet c.All of the optionsarrow_forwardIndicate whether the following are true or false. Financial statement analysis is used by insiders and outsiders to identify strengths and weaknesses. Time series analysis compares one firm to another. If you want to determine the gross profit earned on each dollar of sales, use the operating profit margin ratio. The earnings per share ratio is used to predict the amount of cash dividends. Discounted cash flow values an asset based on the future value of cash flows associated with that assetarrow_forward
- Assuming yourself to be Anna, narrate what you would have read in the file. Your narrative should include answers to the following: Note: 1 Retention ratio = 1 – Dividend payout ratio d) If Chatterbox Inc. switches to the new dividend policy, what would be the DPS for the next period?arrow_forwardYou have been hired as a consultant by Capital Pricing Company's CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: risk free rate = 5%; market risk premium = 9.3%; and beta = 1.12. Based on the CAPM approach, what is the cost of common stock from reinvested earnings?arrow_forwardWhich statement is true? O A. Financial statements reflect economic costs. O B. Year-over-year decreases in liabilities are sources of cash. O C. A stock with a beta of 1.00 has the total risk of the market portfolio. O D. Shareholders have the prior claim to the cash flows of a corporation. O E. None of the above are true.arrow_forward
- Use B&M’s data and the free cash flow valuation model to answer the following questions: What is its estimated value of operations? What is its estimated total corporate value? (This is the entity value.) What is its estimated intrinsic value of equity? What is its estimated intrinsic stock price per share?arrow_forwardWhich of the following statements is FALSE?i. Using the payback rule, you can calculate how much profits are earned over the investment period.ii. The IRR is sensitive to the timing of the cash flows.iii. Shareholders have the first claim on the cash flows of the company.arrow_forwardWhich of the following statements is not true? O A cash sale of used machinery and equipment at its net book value (no gain or loss) will neither increase nor decrease the equity multiplier ratio. O Taking out a bank loan and using the funds to purchase new machinery and equipment will increase the book value per share. O Taking out a bank loan and using the funds to buy back some outstanding shares of common stock will increase the return on equity ratio. O Issuing new shares of common stock in exchange for cash will decrease the debt-to-equity ratio. O Using cash to pay off a bank loan will increase total asset turnover.arrow_forward
- 1. What do you think the consequences might be in financial markets if individuals consumed more of their incomes and thereby reduced the supply of funds available to financial institutions? 2. Stem Corporation received confirmation that all its PSE listing requirements were in order, and that it may proceed to issue its stock. The company plans to raise P500 million on the stock issue. On what market do you expect this stock to be traded? Would this transaction take place on the money market or the capital market? 3. Over the past 100 years, the level of government regulation of financial institutions and markets has ebbed and flowed or, as some economists might argue, has ebbed and flooded. Although the laws and regulatory agencies created by the government have various defined and not-so-well defined goals, what might you argue is the single biggest benefit of government regulation?arrow_forwardWhich of the following best describes the market capitalization of a company? Select one: a. it represents the total value of the company b. it is the product of the numbers of shares and the price per share c. it represents the total wealth associated with the company's earnings d. it is the most someone would pay for the stockarrow_forwardplease answer all the question. 1. Identify two important variables to be considered when making an investment decision. 2. What must a company do in the long run to be able to provide a return to investors and creditors? 3. What is the primary objective of financial accounting? 4. Define net operating cash flows. Briefly explain why periodic net operating cash flows may not be a good indicator of future operating cash flows. 5. What is meant by GAAP? why should all companies follow GAAP in reporting to external users? 6. Explain the roles of the SEC and the FASB in the sitting of accounting standards.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning