Question
3a. Calculate McCaffrey's value of operations. Vop = FCF(1+g) = = $ WACC - g 3b. Calculate the company's total value. Total Value = Value
| 3a. Calculate McCaffrey's value of operations. | |||||||||
| Vop = | FCF(1+g) | = | = | $ | |||||
| WACC - g | |||||||||
| 3b. Calculate the company's total value. | |||||||||
| Total Value = | Value of Operations | + | Value of nonoperating assets | ||||||
| = | $ | + | $ | = | $ | ||||
| 3c. Calculate the estimated value of common equity. | |||||||||
| Value of equity = | Total value | - | Value of debt | ||||||
| = | $ | - | $ | = | $ | ||||
| 3d. Calculate the estimated per-share stock price. | |||||||||
| Price per share = | Value of Equity | Number of Shares | |||||||
| = | $ | $ | = | $ | |||||
| McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds $325,000 of non-operating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding. Please show how you ot the work!!! |
| ||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals Of Futures And Options Markets
Authors: John Hull
9th Global Edition
1292422114, 9781292422114
