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XYZ Corporation has a growth rate of 3 percent and a ROIC of 9 percent? What Is

ID: 2750821 • Letter: X

Question

XYZ Corporation has a growth rate of 3 percent and a ROIC of 9 percent? What Is the company's reinvestment rate? The PV of XYZ Corp.'s future operating free-cash flow Is $500 million. It has debt outstanding of $30 million and cash and marketahle securities of $10 million. It also owns an undeveloped tract of land recently appraised for $8 million. There are 5 million common shares outstanding. What Is the estimated value of each share of stock? Next year ABC Co. Is projected to have FCFF equal to $50 million. Growth Is expected to be 2% In perpetuity. The Company's WACC is 14%. What is the value of the company? Consolidated Manufacturing Corp. would like to determine its cost ol equity. It provides you with the following information: Using the Capital Asset Pricing Model, what is the cost of equity?

Explanation / Answer

1)

Reinvestment rate:

= ROIC×(1+Growth rate)

= 9%×(1+3%)

= 9.27%