Question 3) A company’s market-to-book ratio is higher than peer firms (comparable firms). Which of the following is most likely to be the case? (ceteris peribus – meaning, all else equal!) i)Growth opportunities for this company is higher ii)The Debt-to-Equity ratio for this firm is higher iii)The current period’s free cash flows are lower iv)The […]
Question Mary plans on retiring in 30 years by purchasing a house on the coast. She estimates she will need $1,000,000 saved at that time and is starting now. What payment would Mary need to make yearly into a savings account with a tax-rate of 35% and an average market return of 8.0%? A. $14,542 […]
Question Big Corp. borrows $200 million at a rate of 9.0% to finance a new plant. They will fully repay the loan with annual payments in 10 years. How much will they pay in total over the 10 years to repay the loan in full? A. $218,000,000 B. $311,640,180 C. $231,164,018 D. $473,472,735 E. $623,280,360 Looking […]
Question You estimate that the free cash flows of a firm will be $2million, $10million, $18million and $20million over the next four years. You estimate (properly) that the cash flows will grow at 4% thereafter (and you are comfortable with the steady-state year free cash flow). You have calculated the cost of equity capital = 15.5% and […]
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