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In: Finance
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.
| Year | 1 | 2 | 3 | 4 | 5 |
| FCF | -$22.31 | $38.4 | $43.5 | $51.4 | $56.5 |
The weighted average cost of capital is 10%, and the FCFs are
expected to continue growing at a 4% rate after Year 5. The firm
has $25 million of market-value debt, but it has no preferred stock
or any other outstanding claims. There are 20 million shares
outstanding. Also, the firm has zero non-operating assets. What is
the value of the stock price today (Year 0)? Round your answer to
the nearest cent. Do not round intermediate calculations.
$ per share
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free
cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.89
$37.4 $43.9 $52.2 $55.6 The weighted average cost of capital is 9%,
and the FCFs are expected to continue growing at a 4% rate after
Year 5. The firm has $25 million of market-value debt, but it has
no preferred stock or any other outstanding claims. There are 18
million shares outstanding. Also, the firm has zero...
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year...
Quantitative Problem 2: Hadley Inc. forecasts
the year-end free cash flows (in millions) shown below.
Year
1
2
3
4
5
FCF
-$22.13
$38.4
$43.5
$52.8
$55.9
The weighted average cost of capital is 9%, FCFs are expected to
continue growing at a 4% rate after Year 5. The firm has $26
million of market-value debt, but it has no preferred stock or any
other outstanding claims. There are 18 million shares outstanding.
What is the value of the stock...
Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3...
Hadley Inc. forecasts the year-end free cash flows (in millions)
shown below.
Year
1
2
3
4
5
FCF
-$22.95
$38.5
$43.9
$52.2
$56.4
The weighted average cost of capital is 10%, and the FCFs are
expected to continue growing at a 3% rate after Year 5. The firm
has $24 million of market-value debt, but it has no preferred stock
or any other outstanding claims. There are 21 million shares
outstanding. What is the value of the stock price...
Vasudevan, Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost...
Vasudevan, Inc. forecasts the free cash flows (in millions)
shown below. If the weighted average cost of capital is 15% 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? Enter your answer rounded to two decimal
places. Do not enter $ or comma in the answer box. For example, if
your answer is $12,300.456 then...
Vasudevan, Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost...
Vasudevan, Inc. forecasts the free cash flows (in millions)
shown below. If the weighted average cost of capital is 18% 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? Enter your answer rounded to two decimal
places. Do not enter $ or comma in the answer box. For example, if
your answer is $12,300.456 then...
Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 0...
Use the cash flows and competitive spreads shown in the table
below.
($ millions)
Year 0
Year 1
Year 2
Years 3–10
Investment
180
Production (millions of pounds per year)
0
0
48
88
Spread ($ per pound)
1.03
1.03
1.03
1.03
Net revenues
0
0
49.44
90.64
Production costs
0
0
38.00
38.00
Transport
0
0
0
0
Other costs
0
28
28
28
Cash flow
–180
28
–16.56
–24.64
NPV (at r = 7%) = 0
Assume the...
Use the cash flows and competitive spreads shown in the table below. ($ millions) Year 0...
Use the cash flows and competitive spreads shown in the table
below.
($ millions)
Year 0
Year 1
Year 2
Years 3–10
Investment
180
Production (millions of pounds per year)
0
0
59
99
Spread ($ per pound)
1.14
1.14
1.14
1.14
Net revenues
0
0
67.26
112.86
Production costs
0
0
49.00
49.00
Transport
0
0
0
0
Other costs
0
39
39
39
Cash flow
–180
39
–20.74
–24.86
NPV (at r = 6%) = 0
Assume the...
Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of...
Problem 2-12
Free Cash Flows
Rhodes Corporation: Income Statements for Year Ending
December 31 (Millions of Dollars)
2016
2015
Sales
$6,500.0
$5,000.0
Operating costs excluding depreciation
5,363.0
4,250.0
Depreciation and amortization
150.0
120.0
Earnings before interest and taxes
$987.0
$630.0
Less Interest
140.0
108.0
Pre-tax income
$847.0
$522.0
Taxes (40%)
338.8
208.8
Net income available to common stockholders
$508.2
$313.2
Common dividends
$457.0
$251.0
Rhodes Corporation: Balance Sheets as of December 31
(Millions of Dollars)
2016
2015
Assets
Cash
$77.0...
Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of...
Problem 2-12
Free Cash Flows
Rhodes Corporation: Income Statements for Year Ending
December 31 (Millions of Dollars)
2016
2015
Sales
$4,025.0
$3,500.0
Operating costs excluding depreciation
3,220.0
2,975.0
Depreciation and amortization
96.0
77.0
Earnings before interest and taxes
$709.0
$448.0
Less Interest
87.0
75.0
Pre-tax income
$622.0
$373.0
Taxes (40%)
248.8
149.2
Net income available to common stockholders
$373.2
$223.8
Common dividends
$336.0
$179.0
Rhodes Corporation: Balance Sheets as of December 31
(Millions of Dollars)
2016
2015
Assets
Cash
$51.0...
Problem 2-12 Free Cash Flows Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of...
Problem 2-12
Free Cash Flows
Rhodes Corporation: Income Statements for Year Ending
December 31 (Millions of Dollars)
2016
2015
Sales
$4,025.0
$3,500.0
Operating costs excluding depreciation
3,220.0
2,975.0
Depreciation and amortization
96.0
77.0
Earnings before interest and taxes
$709.0
$448.0
Less Interest
87.0
75.0
Pre-tax income
$622.0
$373.0
Taxes (40%)
248.8
149.2
Net income available to common stockholders
$373.2
$223.8
Common dividends
$336.0
$179.0
Rhodes Corporation: Balance Sheets as of December 31
(Millions of Dollars)
2016
2015
Assets
Cash
$51.0...
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