Question

You have to value a company based on its expected future cash flows. Interest rates are...

You have to value a company based on its expected future cash flows. Interest rates are currently 0.08. If this company expects income of $500 next year (at the end of year 0 or the beginning of the first year), growing at 0.02 each year until the end of the 10th year. Then, income growth is expected to slow to 0 forever-after. What is the value of this company today, in 1000s of dollars?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Calculate the net future value at year 2 for the following cash flows and interest rates...
Calculate the net future value at year 2 for the following cash flows and interest rates compounded quarterly (rounded $ to two places after the decimal). The year 0 cash flow is $373, the year 1 cash flow is $200, and the year 2 cash flow is $-147. The interest rate for the first period (year 0 to 1) is 3% and the interest rate for the second period (year 1 to 2) is 4.5%.
You are running a hot Internet company. Analysts predict that its earnings will grow at 30...
You are running a hot Internet company. Analysts predict that its earnings will grow at 30 % per year for the next five years. After​ that, as competition​ increases, earnings growth is expected to slow to 4 % per year and continue at that level forever. Your company has just announced earnings of $ 1 million. What is the present value of all future earnings if the interest rate is 7 % ​? (Assume all cash flows occur at the...
You are running a hot Internet company. Analysts predict that its earnings will grow at 30%...
You are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After​ that, as competition​ increases, earnings growth is expected to slow to 4% per year and continue at that level forever. Your company has just announced earnings of $4 million. What is the present value of all future earnings if the interest rate is 7%​? ​(Assume all cash flows occur at the end of the​ year.)
Q1: If the discount interest rate is 8%, the future value of a stream of cash...
Q1: If the discount interest rate is 8%, the future value of a stream of cash flows of $500 deposited into an account at the end of each of the next 40 years, is closest to? a. $23 b. $5,962 c. $6,439 d. $20,000 e. $129,528 Q2: If the discount interest rate is 8%, the present value of a stream of cash flows of $500 paid at the beginning of each of the next 40 years, is closest to? a....
A company is considering a project that is expected to generate its first cash flow in...
A company is considering a project that is expected to generate its first cash flow in the amount of $1 million in 6 years. The cash flows thereafter are expected to grow 15% a year until the last cash flow in year 24. Appropriate discount rate of the project is 13%. What is the maximum investment the company should dedicate for this project today? A reevaluation of the project shows that starting from year 25 the project is going to...
I. The prices of financial assets are based on the expected value of future cash flows,...
I. The prices of financial assets are based on the expected value of future cash flows, discount rate, and past dividends. A. True B. False II. By using different discount rates, the market allocates capital to companies based on their risk, efficiency, and expected returns. A. True B. False III. A 10-year bond pays 12% interest on a $1,000 face value annually. If it currently sells for $1,100, what is its approximate yield to maturity? A. 10.35% B. 10.91% C....
Suppose you valuate a firm by discounting the future dividends from the firm. Assume the dividend...
Suppose you valuate a firm by discounting the future dividends from the firm. Assume the dividend will be paid only once a year at the end of the year. Today is the first day of the year. There are two different scenarios about the future dividends. Scenario #1: You believe the first next dividend is, on average, ??[????+1 ] = $36. The dividend growth rate ?? is 3%. You believe the expected dividend amount is growing with the rate ??...
P1.4 Basic DCF Valuation #2: A company has expected free cash flows of $1.45 million, $2.93...
P1.4 Basic DCF Valuation #2: A company has expected free cash flows of $1.45 million, $2.93 million, and $3.2 million in the next three years. Beginning in Year 4, the expected cash flows will grow (or decrease) by 25% in perpetuity. Measure the value of this company as of today using both a 10% and 12% discount rate.
The value of a share of common stock depends on the cash flows it is expected...
The value of a share of common stock depends on the cash flows it is expected to provide, and those flows consist of the dividends the investor receives each year while holding the stock and the price the investor receives when the stock is sold. The final price includes the original price paid plus an expected capital gain. The actions of the marginal investor determine the equilibrium stock price. Market equilibrium occurs when the stock's price is -Select-less thanequal togreater...
Your firm would like to evaluate a proposed new operating division. You have forecasted cash flows...
Your firm would like to evaluate a proposed new operating division. You have forecasted cash flows for this division for the next five​ years, and have estimated that the cost of capital is 12%. You would like to estimate a continuation value. You have made the following forecasts for the last year of your​ five year forecasting horizon​ (in millions of​ dollars): Year 5 Revenues ​ 1,200.0 Operating income 100.0 Net income                              50.0 Free cash flows                                                 110.0 Book value...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT