Question
27. The EBIT of a firm is $300, the tax rate is 35%, the depreciation is $20, capital expenditures are $60, and the increase
27. The EBIT of a firm is $300, the tax rate is 35%, the depreciation is $20, capital expenditures are $60, and the increase in net working capital is $30. What is the free cash flow to the firm? (a) $85 (b) $185 (c) $125 (d) $305 28. Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2.50, a dividend in year 2 of $3.50, and a dividend in year 3 of $4.50. After year 3, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 11%. Using the multistage DDM, the stock should be worth (a) $68.91. (b) $72.34 today. (c) $78.14 (d) $77.82 abab
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