Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

8:13 PN QUESTION 5 The following information pertains to Augustina Co. Ltd. Revenues, which are forecasted to be $500 million in one year, are expected

image text in transcribed

8:13 PN QUESTION 5 The following information pertains to Augustina Co. Ltd. Revenues, which are forecasted to be $500 million in one year, are expected to grow at 10 percent per year for the two years after that, 8 percent per year for the next two years, and 6 percent per year after that. Expenses including depreciation are 60 percent of revenues. Net investment, including net working capital and capital spending less depreciation, is 10 percent of revenues. Because all costs are proportional to revenues, net cash flow (sometimes referred to as free cash flow) grows at the same rate as do revenues. Augustina Co. is an all-equity firm with 12 million shares outstanding. A discount rate of 16 percent is appropriate for such a firm. Assume tax rate as 40%. Compute for the Price per share of Augustina Co. Ltd

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

Contemporary Financial Management

Authors: R. Charles Moyer, William J. Kretlow, James R. Mcguigan

7th Edition

0538877766, 9780538877763

More Books

Students also viewed these Finance questions

Question

=+c) How many factors are involved?

Answered: 1 week ago