Question 1

Misra Inc. forecasts a free cash flow of $35 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC)  is 10.0% and the cost of equity is 15.0%, what is the horizon, or continuing, value in millions at t = 3?

Accepted Answer

A)   $821
B)   $862
C)   $905
D)   $950
E)   $997F) All of the above
G) A) and B)

Question 2

The preemptive right is important to shareholders because it

Accepted Answer

A)   allows managers to buy additional shares below the current market price.
B)   will result in higher dividends per share.
C)   is included in every corporate charter.
D)   protects the current shareholders against a dilution of their ownership interests.
E)   protects bondholders, and thus enables the firm to issue debt with a relatively low interest rate.F) C) and E)
G) B) and C)

Exam 10: Stocks

The preemptive right is important to shareholders because it

Correct Answer
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Misra Inc. forecasts a free cash flow of $35 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, what is the horizon, or continuing, value in millions at t = 3?

Correct Answer
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Exam 10: Stocks

The preemptive right is important to shareholders because it

Correct AnswerverifiedShow Answer

Misra Inc. forecasts a free cash flow of $35 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, what is the horizon, or continuing, value in millions at t = 3?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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