Question
American Transmitter (AT) is a telecommunications firm that currently does not pay a dividend. The following information about AT has been gathered from various sources:Average
American Transmitter (AT) is a telecommunications firm that currently does not pay a dividend. The following information about AT has been gathered from various sources:Average cost of funds8.0 %EBIT$ 600,000Total capital$2,000,000EPS$2.64Shares outstanding100,000Marginal tax rate40.0%
a. Compute the economic value added (EVA) for AT in the current operating period. Is AT a good investment?
b. Given the answer from part (a), compute the EVA dividend that AT could pay without harming the value of the firm.
c. Estimate the market price per share assuming that AT normally has a P/E ratio equal to 15x.
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Faith And Finance
Authors: Jim Palmer
1st Edition
0979635624, 9780979635625
