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In: Accounting

1. Mongolian coal mining company. The expected free cash during the next three years is listed...

1. Mongolian coal mining company. The expected free cash during the next three years is listed below, after which the free cash flow is expected to grow at a constant 7% rate. Its WACC is 11%.

            Yr.       Cash Flow

  1. -2
  2. 3
  3. 5
  1. What is its horizon value (or continuing value—when the cash flows begin to grow at a constant rate)
  2. What is the firm’s value today?

Suppose Mogoin Gol has $10 of debt and 4 stocks outstanding, what is the current price per share?

a.

1337.5, 1020.89, & 6.95 respectively (in dollars)
b.

133.75, 102.09, & 24.07 respectively (in dollars)
c.

133.75, 107, & 24 respectively (in dollars)
d.

133.75, 102.09, & 23.02 respectively (in dollars)

2.

Preemptive rights are good for existing stockholders because it

guarantees them right to receive dividends annually

guarantees them right to net income

guarantees them right to purchase shares before outsiders can purchase them

guarantees them right to choose CEO

3.

is expected to generate $7 million in free cash flow next year, and the free cash flow is expected to grow at a constant rate of 1% per year indefinitely.   Banco Ibrahima has no preferred stock or debt and its WACC is 2.85%.

            If Banco Ibrahima has 4 million in stock outstanding, what is its stock value per share?

a.

$125.00
b.

$131.57
c.

$94.59
d.

$78.25

4.

If you are a retiree, which of the following risks associated with the bonds are you most concerned about?

a.

Price Risk
b.

Interest Rate Risk
c.

Default Risk
d.

Reinvestment Risk

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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