Question
NYU Inc. has 5000 semi-annual bonds selling at $955 each. The coupon rate is 3%. The maturity is 25 years. The firm has a 2
NYU Inc. has 5000 semi-annual bonds selling at $955 each. The coupon rate is 3%. The maturity is 25 years. The firm has a 2 million shares of common stock outstanding with a beta of 1.1. The U.S. T-bill is yielding 4%. The market risk premium is 8%. The tax rate is 20 percent. The target debt-to-equity ratio is .25. The current EBIT is $25 million. Depreciation is $5 million. The change in net working capital is $5 million. Net capital spending is $10 million. NYU Inc also has $8 million cash. If the predicted growth rate in cash flow is 3% indefinitely. What is the stock price?
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