Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

( 1 5 points ) AGE Corporation had sales of $ 4 0 0 million last year. The firm has a WACC of 1 5

(15 points) AGE Corporation had sales of $400 million last year. The firm has a WACC of
15%, which it is expected to be the same in the future. The current estimated cost of debt is
8%. AGE Corp has an outstanding perpetual bond that pays 4% interest annually and has a
face value of $50 million. The firm has an excess cash of $125 million and intends to keep
that amount of excess cash in the future. It has outstanding shares of 20 million. Safe
assumptions regarding the next five years are given below (Depreciation expenses and
CAPEX are measured as a percentage of sales, where the change in NWC is a result of the
changes in sales). It is expected that the firm will enter a stable stage starting in the sixth year
and the FCFs will grow by 5% annually. The corporate tax rate is 30 percent. What is your
estimate of the current stock price?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Property Finance

Authors: Giacomo Morri, Antonio Mazza

1st Edition

1118764404, 978-1118764404

More Books

Students also viewed these Finance questions