Assume that a firm has annual earnings of $7/share which are fully distributed to shareholders at...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume that a firm has annual earnings of $7/share which are fully distributed to shareholders at the end of each year and which are expected to continue forever and grow at a constant rate of 3%. (Ignore tax effects.) Assume that the interest rate you expect to receive on an alternative investment of equal risk is 7%. What is the value of the firm based on the expected cash flow? Write your answer to the nearest dollar (XXX). Assume that a firm has annual earnings of $7/share which are fully distributed to shareholders at the end of each year and which are expected to continue forever and grow at a constant rate of 3%. (Ignore tax effects.) Assume that the interest rate you expect to receive on an alternative investment of equal risk is 7%. What is the value of the firm based on the expected cash flow? Write your answer to the nearest dollar (XXX).
Expert Answer:
Answer rating: 100% (QA)
To calculate the value of the firm based on the expected cash flow we can u... View the full answer
Related Book For
Posted Date:
Students also viewed these corporate finance questions
-
Rick purchased 100 shares of XYZ stock on April 4, Year 4, for $8,600. He bought another 50 shares on February 8, Year 5, for $3,200. He then sold 50 shares of the original 100 shares of XYZ on March...
-
The estimating of income, under conditions of uncertainty as well as of certainty, requires that the accountant trace carefully the relation between income flows and cash movements. While it is true...
-
EBIT is 22.000, taxes 34%, depreciation is 30.000. What is the operating cash flow? Anthony operates a part time auto repair service. He estimates that a new diagnostic computer system will result...
-
The figure shows a coil with a sheet iron core with unlimited magnetic penetration and a rectangular cross-section. The coil is made of insulated copper wire with specific resistance p. Coil...
-
The radius of a spherical nucleus is measured, by electron- scattering methods, to be 3.6 fm. What is the likely mass number of the nucleus?
-
Find the exponential generating function for the sequence 0!, 1!, 2!, 3!, ....
-
As you have seen in this chapter, international trade law is founded on the importance and benefits of removing trade barriers. However, WTO rules also recognize the need to restrain trade in certain...
-
Alou Appliance Center accumulates the following cost and market data at December 31. Compute the lower-of-cost-or-market valuation for the companys total inventory. Inventory Categories Cameras...
-
18. The atomic number of elements P, Q, R and T are 19,17, 14 and 6 respectively. The pair of elements that can react to form an ionic compound is A. Q and T B. R and Q C. Q and P D. R and T 19. The...
-
You work in the human resources department of your company helping new employees fill out the necessary paperwork to get their first paycheck. There are a number of decisions that employees must make...
-
39. "Proof: Supposer and s are rational numbers. If r + s is rational, then by definition of rational r + s = a/b for some integers a and b with b 0. Also sincer and s are rational, r = i/j and s=...
-
An ethical __________ exists when a person is faced with conflicting but ethical choices or alternatives that are neither entirely right nor entirely wrong; an ethical __________ occurs when a person...
-
Shari Willison worked as a geologist in your civil engineering firm for 20 years before succumbing to leukemia last week. With only a few dozen employees, the company has always been a tight-knit...
-
Working as an associate lecturer for a well-known and successful online university, you use your own home as your office. Periodically, you teach residential courses and short, locally based...
-
You are the sales representative for an office supplies rental firm. An online university requested a visit from you to discuss the supply of printing equipment and accompanying consumables to...
-
Agile and lean companies need multiskilled staff capable of carrying out a wide range of different tasks in a seamless way without disrupting the overall workflow of the business. Finding staff...
-
EXCEL SOLUTION NEEDED: EXCEL FORMULA ONLYPLEASE The internal rate of return (IRR) is the rate of returnfor a series of cash flows that results in a zero NPV. Excel's IRRfunction easily computes the...
-
State whether each of the following will increase or decrease the power of a one-way between-subjects ANOVA. (a) The effect size increases. (b) Mean square error decreases. (c) Mean square between...
-
What would happen to the speckle pattern if a laserbeam were projected onto a suspension such as milk rather than onto a smooth wall?
-
Suppose we set up a fringe pattern using a Michelson Interferometer with a mercury vapor lamp as the source. Switch on the lamp in your minds eye and discuss what will happen to the fringes as the...
-
If the electric field vector E(z, t) of an EM wave in vacuum is, at a certain location and time, given by vector E = (10 V/m)(cos 0.5) i write an expression for the associated vector B-field.
-
The Milham Theatre Club has been in existence for a number of years. Members pay an annual subscription of 15 which entitles them to join trips to professional productions at a reduced rate. On 1...
-
The accounting records of the Happy Tickers Sports and Social Club are in a mess. You manage to find the following information to help you prepare the accounts for the year to 31 December 2015. (1)...
-
Think about it for a minute and then list five costs you think are direct and five that you think are indirect.
Study smarter with the SolutionInn App