Quantix's free cash flow (FCF0) is $2.6 million per year and is expected to grow at a

Question:

Quantix's free cash flow (FCF0) is $2.6 million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.2. What is the value of Quantix's operations? If Quantix's has $12 million in debt, what is the current value of Quantix's stock?

Bremer Corporation is interested in acquiring Quantix Corporation. Quantix has 1 million shares outstanding and a target capital structure consisting of 30% debt. Quantix's debt interest rate is 7%. Assume that the risk-free rate of interest is 4% and that the market risk premium is 5%. Both Quantix and Bremer face a 30% tax rate.

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...

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