Jamestown Corp

Year 0

Cash & equivalents $40 million

Interest expense $7.2 million

Capital Expenditures per share $2.4

Working Capital Investment per share $1.7

Market Value of Equity per share $56

Target debt ratio 30%

Cost of equity (CAPM) 12%

Depreciation (per share) $1.8

Tax rate 37.5%

Net Income (earnings) per share$5

Shares outstanding 5 million

Earnings, capex, depreciation and working capital will all grow at 5% in the future.

Use the data below to answer the following question: What will be FCFE in year 1 for ABC Corp?

$3.56

$4.31

$4.53

$4.65

The value of Jamestown Corp. is closest to:

$48.36

$50.86

$61.57

$64.71

If Jamestown Corp is currently selling for $56, the stock (based on our analysis) is:

Overvalued

Undervalued

Correctly valued

Cannot be determined

If Jamestown became an acquisition target and another company offered $450 million to buy it, and the current market price represents the fair value of equity, then:

Jamestown management should not take is since $450 is more than the total value of the firm

Jamestown management should not take is since $450 is less than the total value of the firm

Jamestown management should take is since $450 is more than the total value of the firm

Jamestown management should take is since $450 is less than the total value of the firm