We want to estimate the value of Teladoc Health Inc. (NYSE: TDOC). Teladoc is a new company that does not pay a dividend and the required return is 8.5%. The free cash flow for TDOC is $202 million and expected to grow at 9%, 8%, and 7% for the next 3 years and then at a constant growth rate of 3%. The outstanding debt for TDOC is $1.2 billion and the number of shares of common stock outstanding is 25 million and there is no preferred stock. What is the estimated stock price today?
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We want to estimate the value of Teladoc Health Inc. (NYSE: TDOC). Teladoc is a new company that does not pay a dividend and the required return is 8.5%. The
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- Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?Happy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If you invest in the corporate debt of Happy Time Inc. today, what is your expected percentage return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.3 Normal 0.4 Recession 0.3 O 36.87% O -26.37% 64.8% O-16.63% $110 million $101 million $61 millionHappy Time Inc. is expected to generate the following cash flows for the next year, as shown in the table below. Happy Time now only has one outstanding debt with a face value of $110 million to be repaid in the next year. The current market value for the debt is $67 million. The tax rate is zero. If the firm is financed by common equity and debt, what is the expected value of common equity next year? Cash flow in the next year Probability Amount Economy Boom 0.3 $110 million Normal 0.4 $101 million Recession 0.3 $61 million $26.8 million $24.7 million $0 -$18.3 million
- The management of Peerless Fabrics Inc. is considering a change in its capital structure.Currently, Peerless has 100,000 shares outstanding at a market price of $40 each. It is also carrying loansworth $1,500,000 on its balance sheet with an interest rate of 6% p.a, thus implying a corporate D/E ratio of0.375:1The EBIT is $575,000 and is expected to remain constant every year for an indefinite time. Since Peerlessproduces indigenous fabric, it enjoys a tax holiday which is available to all businesses that promote importsubstitution. As such, Peerless lives in a tax-free world for now and passes on the benefit to its shareholdersin the form of 100% dividend payout.The proposal for a change in capital structure is about reducing the reliance on debt during uncertain timesthat the ongoing pandemic has created. After lengthy negotiations with the lenders, the lenders have agreedfor Peerless to pre-pay 25% of its outstanding loan without penalty. The management is keen to follow throughwith…The management of Peerless Fabrics Inc. is considering a change in its capital structure.Currently, Peerless has 100,000 shares outstanding at a market price of $40 each. It is also carrying loansworth $1,500,000 on its balance sheet with an interest rate of 6% p.a, thus implying a corporate D/E ratio of0.375:1The EBIT is $575,000 and is expected to remain constant every year for an indefinite time. Since Peerlessproduces indigenous fabric, it enjoys a tax holiday which is available to all businesses that promote importsubstitution. As such, Peerless lives in a tax-free world for now and passes on the benefit to its shareholdersin the form of 100% dividend payout.The proposal for a change in capital structure is about reducing the reliance on debt during uncertain timesthat the ongoing pandemic has created. After lengthy negotiations with the lenders, the lenders have agreedfor Peerless to pre-pay 25% of its outstanding loan without penalty. The management is keen to follow throughwith…The management of Peerless Fabrics Inc. is considering a change in its capital structure.Currently, Peerless has 100,000 shares outstanding at a market price of $40 each. It is also carrying loansworth $1,500,000 on its balance sheet with an interest rate of 6% p.a, thus implying a corporate D/E ratio of0.375:1The EBIT is $575,000 and is expected to remain constant every year for an indefinite time. Since Peerlessproduces indigenous fabric, it enjoys a tax holiday which is available to all businesses that promote importsubstitution. As such, Peerless lives in a tax-free world for now and passes on the benefit to its shareholdersin the form of 100% dividend payout.The proposal for a change in capital structure is about reducing the reliance on debt during uncertain timesthat the ongoing pandemic has created. After lengthy negotiations with the lenders, the lenders have agreedfor Peerless to pre-pay 25% of its outstanding loan without penalty. The management is keen to follow throughwith…
- The management of Peerless Fabrics Inc. is considering a change in its capital structure.Currently, Peerless has 100,000 shares outstanding at a market price of $40 each. It is also carrying loansworth $1,500,000 on its balance sheet with an interest rate of 6% p.a, thus implying a corporate D/E ratio of0.375:1The EBIT is $575,000 and is expected to remain constant every year for an indefinite time. Since Peerlessproduces indigenous fabric, it enjoys a tax holiday which is available to all businesses that promote importsubstitution. As such, Peerless lives in a tax-free world for now and passes on the benefit to its shareholdersin the form of 100% dividend payout.The proposal for a change in capital structure is about reducing the reliance on debt during uncertain timesthat the ongoing pandemic has created. After lengthy negotiations with the lenders, the lenders have agreedfor Peerless to pre-pay 25% of its outstanding loan without penalty. The management is keen to follow throughwith…The table below shows the forecast cash flow information of Good Time Inc. for the next year. The required debt payment in the next year is $88 million, with the current market value of $75 million. The company pays no tax. If you invest in the corporate debt of Good Time Inc. today, what is your expected return on this investment? Cash flow in the next year Economy Probability Amount Boom 0.6 $148 million Recession 0.4 I$61 million O 18.77% O 10.29% O 2.93% O 28.67%Gupta Corporation is undergoing a restructuring, and its free cash flows are expected to vary considerably during the next few years. However, the FCF is expected to be $85.00 million in Year 5, and the FCF growth rate is expected to be a constant 6.5% beyond that point. The weighted average cost of capital is 12.0%. What is the horizon (or continuing) value (in millions) at t = 5? a. $1,646 O b. $1,234 O c. $1,432 d. $1,662 O e. $2,041
- Remex (RMX) currently has no debt in its capital structure. The beta of its equity is 1.44. For each year into the indefinite future, Remex's free cash flow is expected to equal $26 million. Remex is considering changing its capital structure by issuing debt and using the proceeds to buy back stock. It will do so in such a way that it will have a 25% debt-equity ratio after the change, and it will maintain this debt-equity ratio forever. Assume that Remex's debt cost of capital will be 6.37%. Remex faces a corporate tax rate of 15%. Except for the corporate tax rate of 15%, there are no market imperfections. Assume that the CAPM holds, the risk-free rate of interest is 4.9%, and the expected return on the market is 10.78%. a. Using the information provided, fill in the table below. b. Using the information provided and your calculations in part (a), determine the value of the tax shield acquired by Remex if it changes its capital structure in the way it is…barnette Inc.'s free cash flows are expected to be unstable during the next few years while the company undergoes restructuring. However, FCF is expected to be $39.71 million in Year 5, i.e., FCF at t = 5 equals $39.71 million, and the FCF growth rate is expected to be constant at 4.75% beyond that point. If the weighted average cost of capital is 11%, what is the horizon value (in millions) at t = 5?You’ve collected the following information about Odyssey, Inc.:Sales =$165,000Net income = $14,800Dividends = $9,300Total debt = $68,000Total equity = $51,000What is the sustainable growth rate for the company? If it does grow at this rate, how much new borrowing will take place in the coming year, assuming a constant debt –equity ratio? What growth rate could be supported with no outside financing at all?
