Question: 5 . You are trying to value a company which is going to pay out a monthly cash flow of $ 1 0 0 ,

5. You are trying to value a company which is going to pay out a monthly cash flow of $100,000 to its shareholders tomorrow. You expect the company to continue making that payout forever, and expect that amount to exhibit a 1% monthly growth rate. What would be the value of the company today, if you believe the appropriate discount rate for such investment is 18% per year? Assume the tax rate on corporate payouts is zero.5. You are trying to value a company which is going to pay out a monthly cash flow of $100,000 to its shareholders tomorrow. You expect the company to continue making that payout forever, and expect that amount to exhibit a 1% monthly growth rate. What would be the value of the company today, if you believe the appropriate discount rate for such investment is 18% per year? Assume the tax rate on corporate payouts is zero.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111120), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303....

Q:

5.1Topical Case: Enviro-Lawn Consider the following real world case that was published in Journal of Business Education, Vol. 2, Spring, 2001, pp. 2330. It is reprinted here with permission from the...

Q:

5.1Topical Case: Enviro-Lawn Consider the following real world case that was published in Journal of Business Education, Vol. 2, Spring, 2001, pp. 2330. It is reprinted here with permission from the...

Q:

You are trying to value a company which is going to pay out a monthly cash flow of $ 1 0 0 , 0 0 0 to its shareholders tomorrow. You expect the company to continue making that payout forever, and...

Q:

You are trying to value a company which is going to pay out a monthly cash flow of $ 1 0 0 , 0 0 0 to its shareholders tomorrow. You expect the company to continue making that payout forever, and...

Q:

the question is - explain why a company such as CompUSA would prepare monthly cash flow busgets for the entire year. explain the role if sensitivity analysis in the monthly planning process. Required...

Q:

Ze-Bikes, Ltd (ZB) is a company that has been selling e-bikes for the past 10 years. They are now considering a new generation of e-bikes, a "Ze-Bike". These Ze-bikes are more efficient and require...

Q:

Monthly Cash Flow Construction We now show how to construct a monthly cash ow for a hypothetical pass-through given a PSA assumption. For the purpose of this illustration, the underlying mortgages...

Q:

Managerial Accounting please answers me this questions i need it now 10. 11. At a production level of 5,000 telescopes, Future Enterprises' average cost per telescope is $55. What is the total cost...

Q:

Ze-Bikes, Ltd (ZB) is a company that has been selling e-bikes for the past 10 years. They are now considering a new generation of e-bikes, a "Ze-Bike". These Ze-bikes are more efficient and require...

Q:

3. XYZ Co has two mutually exclusive investments X and Y. Investment X has an initial capital outlay of $105 million, and the investment is expected to generate $64 million in one year, $45 million...

Q:

Water in an open dish exposed to dry air at 25oC is found to vaporize at a constant rate of 0.04 g/h-cm2. Assuming the water surface to be at the wet-bulb temperature of ll.0C, calculate the...

Q:

McGraw Medical Center has received a bankruptcy notice for Phillip Hollister. Hollister owes the medical center $1,350. The bankruptcy notice indicates that the medical center cant expect to receive...

Q:

The demand for a good both depends upon the price p o f the good and the tax rate t : D = f ( p , h ( t ) ) . The supply o f the good depends o n the price: S = g ( p ) . For any given value o f t ,...

Q:

Francis Equipment AG closes its books regularly on December 31, but at the end of 2022 it held its cash account open so that a more favorable statement of financial position could be prepared for...

Q:

One of the main applications of priority queues is in operating systemsforscheduling jobs on a CPU. In this project you are to build a program that schedules simulated CPU jobs. Your program should...

Q:

Music streaming services are the most popular way to listen to music. Data gathered over the last 12 months show Apple Music was used by an average of 1.65 million households with a sample standard...

Q:

Explain the accounting treatment required when a change is made to the estimated service life of equipment

Q:

Split Rail Fence Company sells and installs fencing materials in Colorado. U.S. Immigration and Customs Enforcement (ICE) sent Split Rail a list of the companys employees whose documentation did not...

Q:

How could ISO 1 4 0 0 1 support the strategic plan of Procter & Gamble?

Q:

4.63 Compute the probability of 7 successes in a random sample of size n = 14 obtained from a population of size N = 30 that contains 15 successes.

Q:

4.65 Compute the probability of 3 successes in a random sample of size n = 5 obtained from a population of size N = 40 that contains 25 successes.

Q:

4.69 A bond analyst was given a list of 12 corporate bonds. From that list she selected 3 whose ratings she felt were in danger of being downgraded in the next year. In actuality, a total of 4 of the...