Market place inc has current sales of $8,000 in millions, an operating ratio of 5% a capital
Question:
Market place inc has current sales of $8,000 in millions, an operating ratio of 5% a capital requirement ratio of 30% a tax rate of 40% and a corporate cost of capital of 10%. Under new management sales are expected to grow 20% in year 1, 15% in year 2, 8% in year 3, 4% in year 4 and then grow at a constant rate of 4% after year 4. In addition the firm has the following balance sheet items:
Please help with Parts A, B and C. Thank you!!
(000,000)
Short term investments = $50
Short term debt notes payable = $200
Long term debt bonds = $500
Preferred stock = $0
Number of shares of common stock = 100
- What is the firms free cash flow at the end of year 1?
Options: $128.96, $34.77, $0, $67.5, $81
- What is the firms horizon value at the end of year 4?
Options: 13,011, 9,035, 12,198, 8,267
- What is the firms current equity value of price per share?
Options: 46.91, 85.65, 150.26, 56.7
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates