An analyst is trying to estimate the intrinsic value of the stock of ATR Kim Eng. The analystestimates that ATR Kim Eng's free cash flow during the next year will be P25 million. Theanalyst also estimates that the company's free cash flow will increase at a constant rate of7% a year and that the company's WACC is 10%. ATR Kim Eng has P200 million of long-term debt and preferred stock and 30 million outstanding shares of common stock. Whatis the estimated per-share price of ATR Kim Eng's common stock?O P27.78O P8.33O P34.43O P21.11

Value of operations Free cash flow/(WACC-Growth rate) P25/(10%-7%) P25/3% P 833.33

Answered: An analyst is trying to estimate the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

An analyst is trying to estimate the intrinsic value of the stock of ATR Kim Eng. The analyst estimates that ATR Kim Eng’s free cash flow during the next year will be P25 million. The analyst also estimates that the company’s free cash flow will increase at a constant rate of 7% a year and that the company’s WACC is 10%. ATR Kim Eng has P200 million of long-term debt and preferred stock and 30 million outstanding shares of common stock. What is the estimated per-share price of ATR Kim Eng’s common stock? Group of answer choices P21.11 P27.78 P34.43 P8.33
An analyst is trying to estimate the intrinsic value of the stock of ATR Kim Eng. The analyst estimates that ATR Kim Eng’s free cash flow during the next year will be P25 million. The analyst also estimates that the company’s free cash flow will increase at a constant rate of 7% a year and that the company’s WACC is 10%. ATR Kim Eng has P200 million of long-term debt and preferred stock and 30 million outstanding shares of common stock. In the Philippine stock exchange, ATR Kim Eng's common stock is traded at P30.00. What can be said of the stock price's condition? a. undervalued/underpriced b. overvalued/overpriced c. oversold d. in equillibrium
An analyst is trying to estimate the intrinsic value of the stock of ATR Kim Eng. The analyst estimates that ATR Kim Eng's free cash flow during the next year will be P25 million. The analyst also estimates that the company's free cash flow will increase at a constant rate of 7% a year and that the company's WACC is 10%. ATR Kim Eng has P200 million of long-term debt and preferred stock and 30 million outstanding shares of common stock. What is the estimated per-share price of ATR Kim Eng's common stock? 27.78 21.11 8.33 34.43
The stock of Nogro Corporation is currently selling for $28 per share. Earnings per share in the coming year are expected to be $7.00. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 25% rate of return per year. This situation is expected to continue indefinitely. Required: Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro’s investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places. What would happen to its…
The stock of Nogro Corporation is currently selling for $29 per share. Earnings per share in the coming year are expected to be $3.90. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained and invested in projects that earn a 21% rate of return per year. This situation is expected to continue indefinitely. a. Assuming the current market price of the stock reflects its intrinsic value as computed using the constant-growth DDM, what rate of return do Nogro's investors require (round to 2 decimal places)? Rate of Return ?% b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing were reinvested (round to 2 decimal places)? PVGO $?
The analyst estimates that after three years the National Inc’s free cash flow will grow at a constant rate of 6% per year. The analyst estimates that the company’s WACC is 10%. The total market value of debt and preferred stock is P25,000 and there are 1,000 outstanding shares of common stock. What is the intrinsic value of the company’s common stock? a. P99.50 b. P84.34 c. P75.31 d. P112.22
An analyst is estimating the intrinsic value Harkleroad Technologies' stock. Harkleroad's free cash flow is expected to be $25 million this year, and grow at a constant rate of 7% a year. The company's WACC is 10%. Harkleroad has $150 million of long-term debt and $70 preferred stock, and 20 million outstanding shares of common stock. What is the estimated per-share price of Harkleroad Technologies' common stock?
The table below shows the forecast cash flow information of Good Time Inc. for the nextyear. The required debt payment in the next year is $88 million, with a current market valueof $60 million. The company pays no tax. If you invest in the corporate debt of Good TimeInc. today, what is your expected return on this investment?
XYZ has an expected Free Cash Flow of $109M next year and will remain the same in perpetuity. It has a WACC of 8%. The Company has Short term investment amounting to $104M. The Company has Preferred stock of $50M, Debt of $97M and 110M of common stock outstanding. What is the intrinsic value of its common stock?
An analyst is trying to estimate the intrinsic value of Blue Co. that has a weighted average cost of capital at 10%. The estimated free cash flows for the company for the following years are: Year 1 P3,000 Year 2 P4,000 Year 3 P5,000 The analyst estimates that after three years, free cash flow will grow at a constant annual percentage of 6%. What is the total intrinsic value of the company's common stock if combined debt and preferred stock has a P25,000 market value? *
Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 million
Phosfranc Inc. is valuing the equity of a company using the free cash flow from equity, FCFE, approach and has estimated that the FCFE in the next three years will be $6.25, $7.70, and $8.36 million respectively. Beginning in year 4, the company expects the cash flows to increase at a rate of 4 percent per year for the indefinite future. It is estimated that the cost of equity is 12 percent. What is the value of equity in this company? (Do not round intermediate computations. Round final answer to the nearest million.) A) $77 million B) $95 million C) $109 million D) $60 million

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS