Please show all work.
FINA Inc. considers a project with the following information:
Initial Outlay: 1,500
After-tax cash flows:
Year 1: -$100
Year 2: $1000
Year 3: $700
FINA’s assets are $500 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 10% Bonds: $180 million, paying 9% coupon with quarterly payments, and maturity of 5 years. FINA sold its $1,000 par-value bonds for $1,070 and had to incur $20 flotation cost per bond. Preferred Stocks: $20 million, paying $15 dividends per share. FINA sold its preferred shares for $210 and had to incur a $10/share flotation cost. Common Stocks: $200 million, the beta of FINA stocks is 1.5, the 90 day Treasury yield is 5%, and the return on the market portfolio is 15 %. FINA is subject to a 20% tax rate. Assuming the company uses WACC to compute the present value of the future cash flows, please find the following:
10) FINA is expected to pay a $4 per share common stock dividend at the end of this year. The dividends are expected to grow at 6% per year forever. How much should be the value of FINA’s shares?
10). Cost of equity (ke) = risk-free rate + beta*(market return - risk-free rate)
= 5% + 1.5*(15%-5%) = 20%
Intrinsic price per share = expected dividend/(ke - perpetual growth rate)
= 4/(20%-6%) = 28.57 per share
Please show all work. FINA Inc. considers a project with the following information: Initial Outlay: 1,500...
FINA Inc.’s assets are $500 million, financed through bank loans, bonds, preferred stocks and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 9% Bonds: $180 million, paying 9% coupon with semi-annual payments, and maturity of 5 years. FINA sold its $1,000 par-value bonds for $940 and had to incur $40 flotation cost per bond. Preferred Stocks: $20 million, paying $15 dividends per share. FINA sold its preferred shares for $210 and had to incur...
FINA Company's assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 3% Bonds: $280 million, paying 8% coupon with semi- annual payments, and maturity of 10 years. FINA sold its $1,000 par-value bonds for $970 and had to incur $20 flotation cost per bond. Preferred Stocks: $120 million, paying $15 dividends per share. FINA sold its preferred shares for $220 and had to...
FINA Company's assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 3% Bonds: $280 million, paying 8% coupon with semi- annual payments, and maturity of 10 years. FINA sold its $1,000 par-value bonds for $970 and had to incur $20 flotation cost per bond. Preferred Stocks: $120 million, paying $15 dividends per share. FINA sold its preferred shares for $220 and had to...
Fina, inc’s assets are $500 million, financial through bank loans, bonds, preferred stocks and common stocks. the amounts are as follows: Bank Loans: $100 million borrowed at 9% Bonds: $180 million, paying 9% coupon with semi annual payments , andmaturity of 5 years. FINA sold As $1,000Par-Value bonds for $940 and had to incur $40 flotation cost per bond . PreferredStocks: $20 million , paying $15 dividends per share For $210 and had to incur $10/share flotation costs Common Stocks...
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