The current value of a company is $25 million. If the value of the company six...

The current value of a company is $25 million. If the value of the company six years ago was $9 million, what is the company’s mean annual growth rate over the past six years (to decimal)?

Solutions

Expert Solution

Compound Annual Growth Rate={ [(V final)/(V begin)]^1/t }-1

V final = final value

V Begin= Beginning value

={[(25)/(9)]^1/6}-1

=1.1856311015-1 =0.1856311015

CAGR or COMPOUND ANNUAL GROWTH RATE is the mean annual growth over a period of time of an investment. The period will ne longer than one year.

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Six Company sells an asset with a $1 million fair value to A Company. A Company...

Six Company sells an asset with a $1 million fair value to A Company. A Company agrees to make six equal payments, each to be paid one year apart, commencing on the date of sale. The payments include principal and 6% annual interest. What is the amount of the annual payments? can u solve this using the financial calculator method (pv= fv= n= pmt= )and is this gonna be using beginning mode (annuity due) or end mode (ordinary annuity)

Suppose a company has a book value of equity of $25 million, and has 1 million...

Suppose a company has a book value of equity of $25 million, and has 1 million shares outstanding. The company is expected to earn a net income of $5 million next year, and plans to plow back 20% of its earnings indefinitely to grow. The company has no debt and the firm’s equity holders require a return of 10% on their investment. With this information, answer the following three questions. (i) If we assume the company will grow at a...

Jimmy Pesto Company has a current capital structure consisting of $25 million in long-term debt with...

Jimmy Pesto Company has a current capital structure consisting of $25 million in long-term debt with an interest rate of 8%, $10 million in preferred equity (1 million shares) with an annual dividends of $1 per share, and $100 million in common equity (5 million shares). The firm is considering an expansion plan costing $10 million. The expansion plan can be financed with additional long-term debt at a 9.75% interest rate or the sale of new common stock at $25...

Energy Dynamic is a company with 10 million shares outstanding. The current asset value is $90m...

Energy Dynamic is a company with 10 million shares outstanding. The current asset value is $90m and it has a zero-coupon corporate debt of $100m face value due in 5 years. Suppose company’s asset volatility is 25% and the risk-free interest rate is 6% per annum with continuous compounding. The company makes no dividend payment. 1)Apply the BlackScholes model to estimate company’s equity value. What is the share price? 2)what is the yield to maturity on the debt?

a firm has total assets of 25 million TL. Its current assets is 10 million TL...

a firm has total assets of 25 million TL. Its current assets is 10 million TL and fixed assets (machinery, real estate etc) is 15 million TL. This firm’s financial leverage is %45. Firm has 1 500 000 total outstanding shares with 900 000 shares trading at the stock market and one share sells 10 TL in the stock market. What is the firm’s Price/Book ratio( PD/DD)? Calculate the expected stock price and market cap if the average Price/Book ratio...

XYZ Company has a current market value of $1 million, half of which is debt. Its...

XYZ Company has a current market value of $1 million, half of which is debt. Its current WACC is 9%, and the tax rate is 40%. The firm is considering a new project which costs $500,000 that will be financed completely with debt and has the same operating risk as the firm’s existing projects. Finally, the project is expected to yield an after-tax rate of return of 8.5% per year. What is the appropriate cost of capital to use in...

AFM Radio Inc.’s equity has a book value of $25 million and a market value of...

AFM Radio Inc.’s equity has a book value of $25 million and a market value of $75 million. The market value of its debt is equal to the book value, $50 million. The company’s pre-tax cost of debt is 10%. The company’s stock has a beta of 1.5. Assume a corporate tax rate of 30%, a risk-free rate of 5%, and an expected market risk premium of 10%. (a) What’s the company’s cost of equity, rE? (b) What’s the company’s...

Retiring Debt Early. Smith & Company issued $100 million maturity value of six-year bonds, which carried...

Retiring Debt Early. Smith & Company issued $100 million maturity value of six-year bonds, which carried a coupon rate of six percent and paid interest semiannually. At the time of the offering, the yield rate for equivalent risk-rated securities was eight percent. Two years later, market yield rates had risen to ten percent, and since the company no longer needed the debt financing, executives at Smith & Company decided to retire the debt. Calculate the gain or loss that Smith...

A capital investment project has total installed cost of $25 million and a terminal value of...

A capital investment project has total installed cost of $25 million and a terminal value of $16 million at the end of its 10-year life. The project is expected to generate $5 million in net cash flows after tax each year. The firm’s marginal tax rate is 40 percent, and its cost of capital is 7 percent. Calculate the profitability index of this project.

Ret has 100 million shares outstanding, a current share price of $25, and no debt. Rets...

Ret has 100 million shares outstanding, a current share price of $25, and no debt. Rets management believes that the shares are underpriced, and that the true value is $30 per share. Ret plans to pay $250 million in cash to its shareholders by repurchasing shares. Management expects that very soon new information will come out that will cause investors to revise their opinion of the firm and agree with Ret assessment of the firm's true value. Assume that Ret...

Subjects