Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

River Enterprises has $501 million in debt and 20 million shares of equity outstanding. Its excess cash reserves are $13 million. They are expected to

image text in transcribed
River Enterprises has $501 million in debt and 20 million shares of equity outstanding. Its excess cash reserves are $13 million. They are expected to generate $191 million in free cash flows next year with a growth rate of 2% per year in perpetuity. River Enterprises' cost of equity capital is 12%. After analyzing the company. you believe that the growth rate should be 3% instead of 2%. How much higher (in dollars) would the price per share be if you are right? If the growth rate is 2%, the price per share is $D (Round to the nearest cent.)

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_2

Step: 3

blur-text-image_3

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

Lecture Notes In Introduction To Corporate Finance Volume 1

Authors: Ivan E Brick

1st Edition

9813149892, 9789813149892

More Books

Students also viewed these Finance questions