Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it
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Question:
- Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it is expecting growth in cash flow at an annual rate of 3%. The firm has determined that its weighted average cost of capital (discount rate) is 7%. Using the table below calculate the following:
- What is the present value of Acme's future cash flows using the discounted cash flow model?
- If the firm has 200,000 common shares outstanding, zero preferred shares, and debt with a market value of $10,000,000 what would be the value of each share?
- Now suppose the discount rate increases to 10%. How would your answers to a) and b) above change based on the new discount rate?
Year | Cash Flow |
2018 | 500,000 |
2019 | 550,000 |
2020 | 620,000 |
2021 | 700,000 |
2022 | 800,000 |
Related Book For
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher
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