9.5 CORPORATE VALUATION You expect a company to generate $30 million in free cash flow next...

  

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9.5 CORPORATE VALUATION You expect a company to generate $30 million in free cash flow next year, and you expect the FCF to grow at a constant rate of 5% per year indefinitely. The company has no debt or preferred stock, its Weighted Average Cost of Capital (WACC) is 12%, and it has zero nonoperating assets. If the company has 40 million shares of stock outstanding, what is the stock's value per share? 9.6 PREFERRED STOCK VALUATION A company has perpetual preferred stock outstanding that sells for $25.00 a share and pays a dividend of $2.75 at the end of each year. What is the required rate of return? 9.7 PREFERRED STOCK VALUATION A company issued perpetual preferred stock at $100 with an $8.00 annual dividend. The stock currently yields 7%. At what price is the stock trading? 8.1 Historical returns for Stocks A over the past 5 years is listed here. The risk-free rate is 3%. Years 1 Stock A 20.0% 2 10.0 3 (8.0) 4 6.0 5 12.0 What is the standard deviation for Stock A? Coefficient of Variation? Sharpe Ratio? 8.3 EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 2.5% and the market risk premium is 5%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.75? 9.5 CORPORATE VALUATION You expect a company to generate $30 million in free cash flow next year, and you expect the FCF to grow at a constant rate of 5% per year indefinitely. The company has no debt or preferred stock, its Weighted Average Cost of Capital (WACC) is 12%, and it has zero nonoperating assets. If the company has 40 million shares of stock outstanding, what is the stock's value per share? 9.6 PREFERRED STOCK VALUATION A company has perpetual preferred stock outstanding that sells for $25.00 a share and pays a dividend of $2.75 at the end of each year. What is the required rate of return? 9.7 PREFERRED STOCK VALUATION A company issued perpetual preferred stock at $100 with an $8.00 annual dividend. The stock currently yields 7%. At what price is the stock trading? 8.1 Historical returns for Stocks A over the past 5 years is listed here. The risk-free rate is 3%. Years 1 Stock A 20.0% 2 10.0 3 (8.0) 4 6.0 5 12.0 What is the standard deviation for Stock A? Coefficient of Variation? Sharpe Ratio? 8.3 EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 2.5% and the market risk premium is 5%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.75?