Posted: October 20th, 2022

davenport finc620 full courseb { all discussions + all quiz +research paper + final exam}

all forum discussionThe research paper assignment is worth 220 points or 22% of the course grade. A grade of C or better is required as per MBA policy as this is the Final Assessment for the course.The objectives/purpose of the research paper project are to enable you to do a comprehensive financial analysis of a publicly traded corporation; and provide you with substantial information for you to make recommendations regarding investing in this corporation.Your financial analysis report will be driven by a rigorous ratio analysis, and aggressively supplemented with your written analysis, interpretation, and Assessment of the data.Your research should be strategically driven by two probing questions:-Would you invest your financial capital in the selected firm as a shareholder?-Would you invest your human and intellectual capital in the firm as an employee?Steps in preparation of financial analysis report:1.) Select a publicly held company2.) Select a benchmark firm to compare your company against. The benchmark firm is typically the largest competitor.3.) Obtain the firm’s balance sheet, income statement, and statement of cash flows for the past 5 years. Download or read the firm’s annual report.4.) Go to: .sec.gov/edgar/searchedgar/webusers.htm”>https://monkessays.com/write-my-essay/sec.gov/edgar/searchedgar/webusers.htmResearch EDGAR’s database for additional SEC report filings: 8-k, 10-Q.5.) The following table is the type of Excel or Word table that should be used to gather and report your ratio and financial performance data. Note the 5 financial diagnostic categories that should be used in your analysis.Financial diagnostic categoriesChosen company vs.Benchmark competitor1.) Liquidity of short-term assets-Current ratio-Cash ratio-Quick ratio-Current ratio-Cash ratio-Quick ratio2.) Long-term debt-paying ability-Debt ratio-Debt-equity ratio-Times interest earned-Debt ratio-Debt-equity ratio-Times interest earned3.) Profitability-Net income/sales (profit margin)-Net income/assets (ROA)-Net income/shareholder equity (ROE)-Net income/sales (profit margin)-Net income/assets (ROA)-Net income/shareholder equity (ROE)4.) Asset utilization/ management efficiency-Total asset turnover-Inventory turnover measures-Accounts receivable turnover-Total asset turnover-Inventory turnover measures-Accounts receivable turnover5.) Market measures-Price/earnings ratio-Earnings per common share-Dividend payout-Price/earnings ratio-Earnings per common share-Dividend payoutUse 2-3 ratios per diagnostic category. Place your ratio calculations in the table for your selected companies—primary company and benchmark competitor. Using 5 diagnostic categories, and 3 ratios to assess each category, results in 15 ratio measures per company that will be compared side by side.6.) To validate your research, 5 years of data should be analyzed.7.) The financial analysis report must be written properly. They must include a title page, a table of contents, and a reference page. For both midterm and final report, information sources from the web, etc. must be cited properly, using APA style.This means that every table that you cut and pasted or typed from the web must have a source at the bottom of the table AND that citing must also be included in a reference page at the end of the report.The parts of the research paper are discussed below. The completed report (parts a through h) is due day 7 of week 6. Your project should include:An overview of the corporation.Provide general information regarding the type of business, products and/or services, location of headquarters, name of CEO, number of employees, and countries of operation, etc.The latest financial statementsGet the income statement, balance sheet, cash flow statement, and the statement of owners’ equity for the past fiscal year. Cut and paste them in your report. Do not forget to cite the source under each statement.If you cannot cut and paste them, you may have to type in the information in a table in your report.A summary of each financial statementTake each statement and state the key parts in words. Tell a story from each of the financial statements. For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.”Ratio calculation (include 5 major types of ratios. Refer to chapter 3, Analysis of Financial Statements)Organization of this section is based on the FIVE types of ratios listed in the text book. Calculate the ratios from the financial statements in part c above using Excel or your calculator and present them in a table.Find industry financial ratios online (eg. Yahoo.com) and compare your corporation’s ratios to these industry ratios.Present your results following the five types of ratios discussed in part d.A table with both corporation and industry ratios is required;Discussion of key statistics provided by sources like Yahoo finance.There are many different other statistics available for your corporation. These include market value, beta, and diluted EPS, etc. Discuss some of the key statistics that you think can Help you to determine if this corporation is a good buy or sell.For you to decide if a corporation’s stock is a good buy or sell, you must forecast several key variables, including the stock price.Use historical prices (5 years of monthly data recommended) and forecast the stock price for the next year. Use regression analysis, and/or moving average, etc. to create your forecast.Create a graph from the historical data and show your forecast on the same graph. You can add a trend line to the graph to help you with a forecast. Include the graph in your report.You need to say specifically what the forecasted value of the stock price is.You must address the question, “Is this forecast reasonable?” Must you amend your analysis to get a more reasonable forecast?Other information pertinent to the corporation that could affect its future performance and stock price.This could include dividend policy, capital structure, bond ratings, expert opinions on TV, new projects, litigation, regulation, etc. Search for information on the web regarding this corporation. Look at company complaint blogs, etc.Recommendation regarding the future of this corporation.Is the stock a good buy, average buy, or a poor buy (implying a good sell)?Include a justification of your recommendation based on your analysis and research.Question 12 out of 2 pointsSeveral years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $925 and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation?· Question 22 out of 2 pointsSorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company’s WACC if all the equity used is from retained earnings?· Question 32 out of 2 pointsTo help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm’s tax rate is 40%, what is the component cost of debt for use in the WACC calculation?· Question 42 out of 2 pointsSafeco Company and Risco Inc are identical in size and capital structure. However, the riskiness of their assets and cash flows are somewhat different, resulting in Safeco having a WACC of 10% and Risco a WACC of 12%. Safeco is considering Project X, which has an IRR of 10.5% and is of the same risk as a typical Safeco project. Risco is considering Project Y, which has an IRR of 11.5% and is of the same risk as a typical Risco project.Now assume that the two companies merge and form a new company, Safeco/Risco Inc. Moreover, the new company’s market risk is an average of the pre-merger companies’ market risks, and the merger has no impact on either the cash flows or the risks of Projects X and Y. Which of the following statements is CORRECT?· Question 52 out of 2 pointsA. Butcher Timber Company hired your consulting firm to help them estimate the cost of common equity. The yield on the firm’s bonds is 8.75%, and your firm’s economists believe that the cost of common can be estimated using a risk premium of 3.85% over a firm’s own cost of debt. What is an estimate of the firm’s cost of common from retained earnings?· Question 62 out of 2 pointsMulti-Part 9-1:Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm’s weighted average cost of capital. The balance sheet and some other information are provided below.AssetsCurrent assets$ 38,000,000Net plant, property, and equipment101,000,000Total assets$139,000,000Liabilities and EquityAccounts payable$ 10,000,000Accruals9,000,000Current liabilities$ 19,000,000Long-term debt (40,000 bonds, $1,000 par value)40,000,000Total liabilities$ 59,000,000Common stock (10,000,000 shares)30,000,000Retained earnings50,000,000Total shareholders’ equity80,000,000Total liabilities and shareholders’ equity$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm’s tax rate is 40%.Refer to Multi-Part 9-1. What is the best estimate of the after-tax cost of debt?· Question 72 out of 2 pointsMulti-Part 9-1:Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm’s weighted average cost of capital. The balance sheet and some other information are provided below.AssetsCurrent assets$ 38,000,000Net plant, property, and equipment101,000,000Total assets$139,000,000Liabilities and EquityAccounts payable$ 10,000,000Accruals9,000,000Current liabilities$ 19,000,000Long-term debt (40,000 bonds, $1,000 par value)40,000,000Total liabilities$ 59,000,000Common stock (10,000,000 shares)30,000,000Retained earnings50,000,000Total shareholders’ equity80,000,000Total liabilities and shareholders’ equity$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm’s tax rate is 40%.Refer to Multi-Part 9-1. What is the best estimate of the firm’s WACC?· Question 82 out of 2 pointsTeall Development Company hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and g = 6.50% (constant). Based on the DCF approach, what is the cost of common from retained earnings?· Question 92 out of 2 pointsWhich of the following statements is CORRECT?· Question 102 out of 2 pointsWhich of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?· Question 112 out of 2 pointsAssume that Kish Inc. hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: D0 = $0.90; P0 = $27.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of common from retained earnings?· Question 122 out of 2 pointsSapp Trucking’s balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $50 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $22.50 per share; stockholders’ required return, rs, is 14.00%; and the firm’s tax rate is 40%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?· Question 132 out of 2 pointsMulti-Part 9-1:Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm’s weighted average cost of capital. The balance sheet and some other information are provided below.AssetsCurrent assets$ 38,000,000Net plant, property, and equipment101,000,000Total assets$139,000,000Liabilities and EquityAccounts payable$ 10,000,000Accruals9,000,000Current liabilities$ 19,000,000Long-term debt (40,000 bonds, $1,000 par value)40,000,000Total liabilities$ 59,000,000Common stock (10,000,000 shares)30,000,000Retained earnings50,000,000Total shareholders’ equity80,000,000Total liabilities and shareholders’ equity$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm’s tax rate is 40%.Refer to Multi-Part 9-1. Which of the following is the best estimate for the weight of debt for use in calculating the firm’s WACC?· Question 142 out of 2 pointsCranberry Corp. has two divisions of equal size: a computer manufacturing division and a data processing division. Its CFO believes that stand-alone data processor companies typically have a WACC of 8%, while stand-alone computer manufacturers typically have a 12% WACC. He also believes that the data processing and manufacturing divisions have the same risk as their typical peers. Consequently, he estimates that the composite, or corporate, WACC is 10%. A consultant has suggested using an 8% hurdle rate for the data processing division and a 12% hurdle rate for the manufacturing division. However, the CFO disagrees, and he has assigned a 10% WACC to all projects in both divisions. Which of the following statements is CORRECT?· Question 152 out of 2 pointsKeys Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The company’s marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 30.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?uestion 12 out of 2 pointsAssume a project has normal cash flows. All else equal, which of the following statements is CORRECT?· Question 22 out of 2 pointsMasulis Inc. is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback?WACC:10.00%Year01234Cash flows-$950$525$485$445$405· Question 32 out of 2 pointsWhich of the following statements is CORRECT?· Question 42 out of 2 pointsWhich of the following statements is CORRECT?· Question 52 out of 2 pointsThe relative risk of a proposed project is best accounted for by which of the following procedures?· Question 62 out of 2 pointsWhich of the following statements is CORRECT?· Question 72 out of 2 pointsCurrently, Powell Products has a beta of 1.0, and its sales and profits are positively correlated with the overall economy. The company estimates that a proposed new project would have a higher standard deviation and coefficient of variation than an average company project. Also, the new project’s sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong. On the basis of this information, which of the following statements is CORRECT?· Question 82 out of 2 pointsWhich of the following statements is CORRECT?· Question 92 out of 2 pointsEhrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project’s MIRR? Note that a project’s MIRR can be less than the WACC (and even negative), in which case it will be rejected.WACC:10.00%Year0123Cash flows-$1,000$450$450$450· Question 102 out of 2 pointsWhich of the following statements is CORRECT?· Question 110 out of 2 pointsWhich of the following statements is CORRECT?· Question 122 out of 2 pointsProjects S and L both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same WACC, 10%. However, S has a higher IRR than L. Which of the following statements is CORRECT?· Question 132 out of 2 pointsSuppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the followingindependent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?· Question 142 out of 2 pointsWhich of the following is NOT a relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project?· Question 152 out of 2 pointsQuestion· Q1Which of the following statements is CORRECT?· Question 22 out of 2 pointsWhich of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities?· Question 32 out of 2 pointsData on Wentz Inc. for 2008 are shown below, along with the payables deferral period (PDP) for the firms against which it benchmarks. The firm’s new CFO believes that the company could delay payments enough to increase its PDP to the benchmarks’ average. If this were done, by how much would payables increase? Use a 365-day year.Cost of goods sold =$75,000Payables =$ 5,000Payables deferral period (PDP) =24.33Benchmark payables deferral period =30.00· Question 42 out of 2 pointsRomano Inc. has the following data. What is the firm’s cash conversion cycle?Inventory conversion period =38 daysAverage collection period =19 daysPayables deferral period =20 days· Question 50 out of 2 pointsWhittington Inc. has the following data. What is the firm’s cash conversion cycle?Inventory conversion period =41 daysAverage collection period =31 daysPayables deferral period =38 days· Question 62 out of 2 pointsHelena Furnishings wants to reduce its cash conversion cycle. Which of the following actions should it take?· Question 72 out of 2 pointsEdwards Enterprises follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy. The firm’s annual sales are $400,000; its fixed assets are $100,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $35,000; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is thedifference in the projected ROEs between the restricted and relaxed policies?· Question 82 out of 2 pointsZarruk Construction’s DSO is 50 days (on a 365-day basis), accounts receivable are $100 million, and its balance sheet shows inventory of $125 million. What is the inventory turnover ratio?· Question 92 out of 2 pointsDesai Inc. has the following data, in thousands. Assuming a 365-day year, what is the firm’s cash conversion cycle?Annual sales =$45,000Annual cost of goods sold =$30,000Inventory =$ 4,500Accounts receivable =$ 1,800Accounts payable =$ 2,500· Question 102 out of 2 pointsWhich of the following statements is most consistent with efficient inventory management? The firm has a· Question 112 out of 2 pointsCass & Company has the following data. What is the firm’s cash conversion cycle?Inventory conversion period =50 daysAverage collection period =17 daysPayables deferral period =25 days· Question 122 out of 2 pointsBumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)· Question 132 out of 2 pointsKirk Development buys on terms of 2/15, net 60 days. It does not take discounts, and it typically pays on time, 60 days after the invoice date. Net purchases amount to $550,000 per year. On average, what is the dollar amount of total trade credit (costly + free) the firm receives during the year, i.e., what are its average accounts payable? (Assume a 365-day year, and note that purchases are net of discounts.)· Question 142 out of 2 pointsOther things held constant, which of the following would tend to reduce the cash conversion cycle?· Question 152 out of 2 pointsEdison Inc. has annual sales of $36,500,000, or $100,000 a day on a 365-day basis. The firm’s cost of goods sold is 75% of sales. On average, the company has $9,000,000 in inventory and $8,000,000 in accounts receivable. The firm is looking for ways to shorten its cash conversion cycle. Its CFO has proposed new policies that would result in a 20% reduction in both average inventories and accounts receivable. She also anticipates that these policies would reduce sales by 10%, while the payables deferral period would remain unchanged at 35 days. What effect would these policies have on the company’s cash conversion cycle? Round to the nearest whole day.Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusive projects that are being considered is 12%. Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 12% current WACC. However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?uestion·uestion· on 18 out of 8 pointsWhich of the following statements is CORRECT?· Question 28 out of 8 pointsWhich of the following statements is most CORRECT?· Question 38 out of 8 pointsStock X has a required return of 10%, while Stock Y has a required return of 12%. Which of the following statements is CORRECT?· Question 48 out of 8 pointsWhich of the following statements is CORRECT?· Question 58 out of 8 pointsDeeble Construction Co.’s stock is trading at $30 a share. Call options onthe company’s stock are also available, some with a strike price of $25 andsome with a strike price of $35. Both options expire in three months. Whichof the following best describes the value of these options?· Question 68 out of 8 pointsYou are on the staff of Camden Inc. The CFO believes project acceptance should be based on the NPV, but Steve Camden, the president, insists that no project can be accepted unless its IRR exceeds the project’s risk-adjusted WACC. Now you must make a recommendation on a project that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1 and -$100,000 at the end of Year 2. The president and the CFO both agree that the appropriate WACC for this project is 10%.At 10%, the NPV is $2,355.37, but you find two IRRs, one at 6.33% and one at 527%, and a MIRR of 11.32%. Which of the following statements best describes your optimal recommendation, i.e., the analysis and recommendation that is best for the company and least likely to get you in trouble with either the CFO or the president?· Question 78 out of 8 points1. Based on the corporate valuation model, Hunsader’s value of operations is $300 million. The balance sheet shows $20 million of short-term investments that are unrelated to operations, $50 million of accounts payable, $90 million of notes payable, $30 million of long-term debt, $40 million of preferred stock, and $100 million of common equity. The company has 10 million shares of stock outstanding. What is the best estimate of the stock’s price per share?· Question 88 out of 8 pointsWhen working with the CAPM, which of the following factors can be determined with the most precision?· Question 98 out of 8 pointsVolga Publishing is considering a proposed increase in its debt ratio, which would also increase the company’s interest expense. The plan would involve issuing new bonds and using the proceeds to buy back shares of its common stock. The company’s CFO thinks the plan will not change total assets or operating income, but that it will increase earnings per share (EPS). Assuming the CFO’s estimates are correct, which of the following statements is CORRECT?· Question 108 out of 8 pointsIf two firms have the same current dividend and the same expected dividend growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.· Question 118 out of 8 pointsA highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both have expected returns of 15%, and both are equally correlated with the market, with r = 0.75. However, Stock A’s standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice matter?· Question 128 out of 8 pointsWhich of the following statements is CORRECT?· Question 138 out of 8 pointsYou are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of Years 4 through 7. Breck is essentially riskless, so you are confident the payments will be made, and you regard 8% as an appropriate rate of return on low risk 7-year loans. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X?· Question 148 out of 8 pointsBelow is the common equity section (in millions) of Teweles Technology’s last two year-end balance sheets:20072006CommonStock $2000 $1000RetainedEarnings 2000 2340Total Common Equity $4000 $3340Teweles has never paid a dividend to its common stockholders. Which of the following statements is CORRECT?· Question 158 out of 8 pointsWhich of the following statements isNOT CORRECT?· Question 168 out of 8 pointsIn 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?· Question 178 out of 8 pointsEdmondson Electric Systems is considering a project that has the following cash flow and WACC data. What is the project’s NPV?Note that if a project’s projected NPV is negative, it should be rejected.WACC: 10.00%Year: 0 1 2 3Cash flows: -$1000 $500 $500 $500· Question 188 out of 8 pointsSuppose firms follow similar financing policies, face similar risks, have equal access to capital, and operate in competitive product and capital markets. Under these conditions, then firms that have high profit margins will tend to have high asset turnover ratios, and firms with low profit margins will tend to have low turnover ratios.· Question 198 out of 8 pointsCompanies E and P each reported the same earnings per share (EPS), but Company E’s stock trades at a higher price. Which of the following statements is CORRECT?· Question 208 out of 8 pointsWhich of the following statements is CORRECT?· Question 218 out of 8 pointsOther things held constant, which of the following will cause an increase in net working capital?· Question 228 out of 8 pointsWhich of the following isNOT a capital component when calculating the weighted average cost of capital (WACC)?· Question 238 out of 8 pointsWhich of the following statements is CORRECT?· Question 248 out of 8 pointsWhich of the following doesNOT always increase a company’s market value?· Question 258 out of 8 pointsFirm A has a higher degree of business risk than Firm B. Firm A can offset this by using less financial leverage. Therefore, the variability of both firms’ expected EBITs could actually be identical.Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be-$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm’s value of operations, in millions?

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