Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If yqu plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.) c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? Your expected return from holding Covan stock until the beginning of year 2 is %. ( Round to two decimal places.) Data table \table[[Year, 1, 2, 3, 4, cdots
Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If yqu plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.) c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? Your expected return from holding Covan stock until the beginning of year 2 is %. ( Round to two decimal places.) Data table \table[[Year, 1, 2, 3, 4, cdots
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....
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Transcribed Image Text:Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $2 million in excess cash, and it
has no debt. If its cost of capital is 10%, what should be its stock price? Covan reinvests all its FCF and has no plans to add debt or
change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan
stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares
outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock
price should be $ (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If
yqu plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its
price should be $ (Round to the nearest cent.) c. Assume you bought Covan stock at the beginning of year 1. What is your expected
return from holding Covan stock until year 2? Your expected return from holding Covan stock until the beginning of year 2 is %. (
Round to two decimal places.) Data table \table[[Year, 1, 2, 3, 4, cdots
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