Q: Portage Bay Enterprises has $1 million in excess cash, no
Portage Bay Enterprises has $1 million in excess cash, no debt and is expected to have free cash flow of $10 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Po...
See AnswerQ: Heavy Metal Corporation is expected to generate the following free cash flows
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: After then, the free cash flows are expected to grow at the industry average of 4% per year. Usi...
See AnswerQ: Covan, Inc., is expected to have the following free cash
Covan, Inc., is expected to have the following free cash flows: a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 12%, what should its...
See AnswerQ: Consider a project with free cash flows in one year of $
Consider a project with free cash flows in one year of $130,000 or $180,000, with each outcome being equally likely. The initial investment required for the project is $100,000, and the project’s cost...
See AnswerQ: You are an entrepreneur starting a biotechnology firm. If your research
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $30 million. If your research is unsuccessful, it will be worth nothing. To fund y...
See AnswerQ: Acort Industries owns assets that will have an 80% probability of
Acort Industries owns assets that will have an 80% probability of having a market value of $50 million in one year. There is a 20% chance that the assets will be worth only $20 million. The current ri...
See AnswerQ: Marpor Industries has no debt and expects to generate free cash flows
Marpor Industries has no debt and expects to generate free cash flows of $16 million each year. Marpor believes that if it permanently increases its level of debt to $40 million, the risk of financial...
See AnswerQ: Suppose there are no taxes. Firm ABC has no debt,
Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5000 on which it pays interest of 10% each year. Both companies have identical projects that generate free cash flows of $80...
See AnswerQ: Hardmon Enterprises is currently an all-equity firm with an expected
Hardmon Enterprises is currently an all-equity firm with an expected return of 12%. It is considering borrowing money to buy back some of its existing shares, thus increasing its leverage. a. Suppose...
See AnswerQ: Suppose Microsoft has no debt and a WACC of 9.2
Suppose Microsoft has no debt and a WACC of 9.2%. The average debt-to-value ratio for the software industry is 5%. What would its cost of equity be if it took on the average amount of debt for its ind...
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