# Project #16842 - Finance

 Need complete on time an right! 1. Corporate value model Assume that today is December 31, 2012, and that the following information applies to Vermeil Airlines: ⋅ After-tax operating income [EBIT(1 - T)] for 2013 is expected to be \$500 million. ⋅ The depreciation expense for 2013 is expected to be \$190 million. ⋅ The capital expenditures for 2012 are expected to be \$375 million. ⋅ No change is expected in net operating working capital. ⋅ The free cash flow is expected to grow at a constant rate of 6% per year. ⋅ The required return on equity is 14%. ⋅ The WACC is 10%. ⋅ The market value of the company's debt is \$4 billion. ⋅ 90 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Round your answer to the nearest cent. Write out your answer completely. For example, 0.00013 million should be entered as 130. \$ ________

 2.9-5: Constant Growth Stocks Constant growth valuation Thomas Brothers is expected to pay a \$3.5 per share dividend at the end of the year (that is, D1 = \$3.5). The dividend is expected to grow at a constant rate of 9% a year. The required rate of return on the stock, rs, is 17%. What is the stock's current value per share? Round your answer to two decimal places. \$ ________

 8.Preferred stock returns Bruner Aeronautics has perpetual preferred stock outstanding with a par value of \$100. The stock pays a quarterly dividend of \$2, and its current price is \$123. a.  What is its nominal annual rate of return? Round your answer to two decimal places. ________ % b.  What is its effective annual rate of return? Round your answer to two decimal places. ________ %

9.9-5: Constant Growth Stocks

Valuation of a constant growth stock

Investors require a 16% rate of return on Levine Company's stock (that is, rs = 16%).

a.  What is its value if the previous dividend was D0 = \$3.75 and investors expect dividends to grow at a constant annual rate of (1) -4%, (2) 0%, (3) 4%, or (4) 10%? Round answers to the nearest hundredth.
(1) \$ ________
(2) \$ ________
(3) \$ ________
(4) \$ ________

b.  Using data from part a, what would the Gordon (constant growth) model value be if the required rate of return was 15% and the expected growth rate were (1) 15% or (2) 20%? Are these reasonable results?

I.      The results show that the formula does not make sense if the required rate of return is equal to or greater than the expected growth rate.

II.      The results show that the formula makes sense if the required rate of return is equal to or less than the expected growth rate.

III.      The results show that the formula makes sense if the required rate of return is equal to or greater than the expected growth rate.

IV.      These results show that the formula does not make sense if the expected growth rate is equal to or less than the required rate of return.

V.      The results show that the formula does not make sense if the required rate of return is equal to or less than the expected growth rate.

_________________

c.  Is it reasonable to think that a constant growth stock could have g > rs?

I.      It is not reasonable for a firm to grow indefinitely at a rate lower than its required return.

II.      It is not reasonable for a firm to grow indefinitely at a rate equal to its required return.

III.      It is not reasonable for a firm to grow indefinitely at a rate higher than its required return.

IV.      It is reasonable for a firm to grow indefinitely at a rate higher than its required return.

V.      It is not reasonable for a firm to grow even for a short period of time at a rate higher than its required return.

_________________

10.9-7: Valuing the Entire Corporation

Corporate valuation

Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 6% rate. Dozier's WACC is 14%.

 Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... FCF (\$ millions) ....... ....... ....... ....... ....... ....... ....... ...... NA - 9 23 41

a.  What is Dozier's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of \$13,550,000 should be entered as 13.55.
\$ ________ million

b.  What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of \$13,550,000 should be entered as 13.55.
\$ ________ million

c.  Suppose Dozier has \$99 million of debt and 13 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
\$ ________

 Subject Business Due By (Pacific Time) 11/16/2013 02:00 pm
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