Topic 5 Free Cash Flow Valuation In-Class Example Consider the following information for the fictional firm...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Topic 5 Free Cash Flow Valuation In-Class Example Consider the following information for the fictional firm KXS Designs, Inc. Assume that the firm is in a mature industry and has a constant growth rate. i. Determine the FCFF and the intrinsic value of the firm. Determine the enterprise value of the firm. ii. iii. Determine the FCFE and the intrinsic price per share. • The firm has bonds outstanding with a YTM of 7.85% and a market value of $15.38 mln. • KXS's stock is currently priced at $8.63 and there are 3.18 mln shares outstanding. The correlation of returns of KXS's stock and those of the S&P/TSX Composite Index is 0.62. • The annualized volatility of the returns on KXS's stock over the past 10 years is 24.3% while that of the S&P/TSX Composite Index is 13.1%. ● The current Government of Canada 10-Year Benchmark Bond Yield is 1.96% and the expected return on the S&P/TSX Composite Index is 8.70%. Topic 5 Free Cash Flow Valuation In-Class Example Consider the following information for the fictional firm KXS Designs, Inc. Assume that the firm is in a mature industry and has a constant growth rate. i. Determine the FCFF and the intrinsic value of the firm. Determine the enterprise value of the firm. ii. iii. Determine the FCFE and the intrinsic price per share. • The firm has bonds outstanding with a YTM of 7.85% and a market value of $15.38 mln. • KXS's stock is currently priced at $8.63 and there are 3.18 mln shares outstanding. The correlation of returns of KXS's stock and those of the S&P/TSX Composite Index is 0.62. • The annualized volatility of the returns on KXS's stock over the past 10 years is 24.3% while that of the S&P/TSX Composite Index is 13.1%. ● The current Government of Canada 10-Year Benchmark Bond Yield is 1.96% and the expected return on the S&P/TSX Composite Index is 8.70%.
Expert Answer:
Answer rating: 100% (QA)
i Determine the FCFF and intrinsic value of the firm FCFF Net Income Depreciation Capex Change ... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
Students also viewed these accounting questions
-
List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
On the basis of the given scenario create a file Expenses.txt, Open the file and copy it into another Expenses2.txt, Also show output on screen A college has announced a total budget of 50,000Rs.for...
-
Refer to Polaris's financial statements in Appendix A. Compute its profit margin for the years ended December 31, 2011, and December 31, 2010.
-
It has been reported that 40% of adult Americans have made at least one common stock purchase within the past year, 60% have not. You survey 1000 randomly selected adult Americans and find the 486...
-
A \(1000 \mathrm{kHz}\) AM radio station broadcasts with a power of \(20 \mathrm{~kW}\). How many photons does the transmitting antenna emit each second?
-
Valenzuela Company budgeted selling expenses of $30,000 in January, $35,000 in February, and $40,000 in March. Actual selling expenses were $31,000 in January, $34,500 in February, and $47,000 in...
-
2: Write the solution using interval notation. - 12 < 2z + 2 < 6
-
Cherry Hill Glass Company employs a normal-costing system. The following information pertains to the year just ended. Total manufacturing costs were $1,250,000. Cost of goods manufactured was...
-
A power company is planning on developing a new concentrating solar power plant. The capital cost for the plant is $75M in 2021 and $25M in 2022-however, the plant will be able to commence full...
-
The Simpkins II Corporation issued a 5-year $800,000 bond at a coupon rate of 8% on January 1, 2018. Interest is paid semi-annually on June 30 and December 31 of each year. The market yield for bonds...
-
6. [20 pts] Consider the system Y(s) = 5 s +25 +35+4' U (S) where u is input and y is output. a) [14 pts] Derive a state space model for the system b) [3 pts] Given a transfer function, is the...
-
A subsidy offered to residents of areas prone to flooding by the U.S. government is essentially providing sellers with relatively higher valuations to sell at lower prices they would otherwise not....
-
our company needs a solution to simplify the AWS WAF, AWS Shield Advanced, and Amazon VPC security group's administration and maintenance tasks across mulitple accounts and resources. What service...
-
Brenda Backbiter hires Frank Forthright to file a defamation suit against her ex-best friend, Sally Sensitive, and to "spare no expense" in winning. After Sally's attorney has filed the answer to the...
-
Consider an Einstein solid composed of N particles with total energy E. The general expression for the number of microstates of this system is (E+N 1)! (4.3) E! (N 1)! (a) Verify that (4.3) yields...
-
Given that all the choices are true, which one concludes the paragraph with a precise and detailed description that relates to the main topic of the essay? A. NO CHANGE B. Decades, X-ray C. Decades...
-
Quisco Systems has 7.5 billion shares outstanding and a share price of $18. Quisco is considering developing a new networking product in house at a cost of $500 million. Alternatively, Quisco can...
-
Wild Swings Inc.s stock has a beta of 2.5. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate of Wild Swings cost of equity?
-
Rogot Instruments makes fine violins, violas, and cellos. It has $1 million in debt outstanding, equity valued at $2 million, and pays corporate income tax at a rate of 21%. Its cost of equity is 12%...
-
A candlestick chart is similar to a bar chart except that the candlestick chart: A. Represents upward movements in price with Xs. B. Also graphically shows the range of the periods highs and lows. C....
-
What considerations might encourage a market analyst to rely more on a top-down or bottom-up forecast of S&P 500 operating earnings?
-
Which of the following criticisms expressed by Ryan about the use of historical data is the least valid? A. In a context of hyperinflation, the approach may not be appropriate. B. The companies...
Study smarter with the SolutionInn App