70.2K

Verified Solution

Link Copied!

1. Suppose that unexpected news about the firm broke today (t=0) that made investors increase their required rate of return to 22%. Would you be willing to pay $58 for the stock?

   Use the following information to answer the next three questions. Vance Technologies' free cash flows totaled $300 million last year. You expect these cash flows to increase by 10% for the next three years before they level off to a constant 4% growth rate. The current market value for the company's debt and preferred stock is $600 million and $15 million respectively. The company also has $12 million invested in treasury bills. The company has 25 million common shares outstanding. Investors require a 20% rate of return. Find Vance's value of operations (in millions). Round intermediate steps and your final answer to four decimals. Do not use the dollar symbol or words when entering your response. 6.25 points QUESTION 14 Find the intrinsic stock price. Round intermediate steps to four decimals. 64.27 65.32 66.29 65.81 6.25 points QUESTION 15 Suppose that unexpected news about the firm broke today (t=0) that made investors increase their required rate of return to 22%. Would you be willing to pay $58 for the stock? Yes No You'd be indifferent at $58/share. Cannot be determined.

Answer & Explanation Solved by verified expert

See Answer