Janene company has a net free cash flow of $8 million and is expected to grow...

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Janene company has a net free cash flow of $8 million and is expected to grow at 20% during the next 3 years and then grow at 7% thereafter. The company has debt of $120 million and 5,000,000 shares of outstanding common stock. The company pays no dividends and since it would like to retain its earnings, it is not expected to pay any dividends. What are the terminal and intrinsic values of the stock assuming the discount is 11%? (9 Marks) Explain how the concept of intrinsic value fits into the security analysis process. The Big Heel company has net profit of $10 million, sales of $150 million and 2.5 million common stocks outstanding. The company has total assets of $75 millionand total stockholders equity of $45 million. It pays $1 per share in dividends and the stock trades at $20 per share. Given this information determine the following for the company: i) ii) iii) iv) Big Heel's EPS The Price -to-book value ratio The firm's P/E ratio The net profit margin The Dividend payout ratio Assume a firm has a current P/E ratio of 15 and its current EPS is $1.25. It has increased earnings per share by 6% annually in the past and this rate is likely to continue for some If the P/E ratio is expected to increase to 17 in five years, what is the stock price expected be in year five? (3 Marks) Janene company has a net free cash flow of $8 million and is expected to grow at 20% during the next 3 years and then grow at 7% thereafter. The company has debt of $120 million and 5,000,000 shares of outstanding common stock. The company pays no dividends and since it would like to retain its earnings, it is not expected to pay any dividends. What are the terminal and intrinsic values of the stock assuming the discount is 11%? (9 Marks) Explain how the concept of intrinsic value fits into the security analysis process. The Big Heel company has net profit of $10 million, sales of $150 million and 2.5 million common stocks outstanding. The company has total assets of $75 millionand total stockholders equity of $45 million. It pays $1 per share in dividends and the stock trades at $20 per share. Given this information determine the following for the company: i) ii) iii) iv) Big Heel's EPS The Price -to-book value ratio The firm's P/E ratio The net profit margin The Dividend payout ratio Assume a firm has a current P/E ratio of 15 and its current EPS is $1.25. It has increased earnings per share by 6% annually in the past and this rate is likely to continue for some If the P/E ratio is expected to increase to 17 in five years, what is the stock price expected be in year five? (3 Marks)

Answer rating: 100% (QA)

1 To calculate the intrinsic value of the stock we need to calculate the present value of the future cash flows of the company Heres how we can do it Calculate the free cash flow for each of the next ... View the full answer