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Use the following information to answer questions 6 and 7: An analyst gathered the following...

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Finance

Use the following information to answer questions 6 and 7:

An analyst gathered the following information regarding Diago Investments:

  • FCFF at the end of 2011 = $1.1 million
  • Interest expense = $525,000
  • Fixed capital expenditure = $650,000
  • Working capital expenditure = $280,000
  • Depreciation expense = $395,000
  • Net borrowing = $480,000
  • Number of common shares outstanding = 600,000
  • Weighted average cost of capital = 14%
  • Risk free rate of return = 5%
  • Equity market risk premium = 7%
  • Beta of the company's stock = 1.1
  • Expected long-term growth rate in FCFE = 6%
  • Tax rate = 40%

Question: FCFE per share at the end of 2011 is closest to:

Select one:

a. $2.99

b. $2.11

c. $3.82

Question 7

Question text

The value per share of the company's stock at the end of 2011 is closest to:

Select one:

a. $33.36

b. $27.93

c. $31.47

Answer & Explanation Solved by verified expert
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