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Assume Brutus Co. has $50 million in excess cash and no debt. The firm expects to generate additional free cash flows of $60 million per year in subsequent years which they can pay out as a dividend. If Brutus’s unlevered cost of capital is 15%, then the enterprise value of its ongoing operations is PV(FCFs) = $60 million/15% = $400 million.Brutus’s board is meeting to decide how to pay out its $50 million in excess cash to shareholders. The board is considering two options: 1) Use the $50 million to pay a $5 cash dividend for each of Brutus’s 10 million outstanding shares2) Repurchase shares instead of paying a dividend In perfect capital markets, which would investors prefer?

For persons with dementia, reduce their frustration during communication by minimizing the demands on memory and focusing on enjoyable communication opportunities that do not rely onmemory.

A firm has a total market value of assets of $300 million that includes $60 million of cash and 8 million shares outstanding. If the firm uses $30 million of its cash to repurchase shares, what is the new price per share? (Assume perfect capital markets.) 

The fact that a large company can enjoy savings from producing goods in high volume that are not available to a small company is called ________.

Individuals with what medical condition have a reduction of air pressure needed to adequately support speech?

Brutus Buckeye industries is expected to pay a $3.00 dividend at the end of this year. If you expect the company’s dividend to grow by 6% per year forever and the company’s equity cost of capital to be 13%, then the value of a share of the company’s stock is closest to ________.

What are some key variables or assumptions to adjust when doing a sensitivity analysis?

Use the table for the question(s) below. Name Market Capitalization ($ million) Enterprise Value       ($ million) P/E Price/ Book Enterprise Value/ Sales Enterprise Value/ EBITDA Gannet 6350 10,163   7.36 0.73 1.4 5.04 New York Times 2423   3472 18.09 2.64 1.10 7.21 McClatchy   675   3061    9.76 1.68 1.40 5.64 Media General   326   1192 14.89 0.39 1.31 7.65 Lee Enterprises   267   1724    6.55 0.82 1.57 6.65 Average     11.33 1.25 1.35 6.44 Maximum     +60% 112% +16% +22% Minimum     -40% -69% -18% -19% The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry. Another newspaper publishing firm (not shown) had sales of $600 million, EBITDA of $84 million, excess cash of $68 million, $18 million of debt, and 120 million shares outstanding. If the average enterprise value to EBITDA for comparable businesses is used, which of the following is the best estimate of the firm’s share price?

On average, when a bid is announced, the stock price of the target drops.

  Year 1 2  3 4 Free Cash Flow  $12 million $18 million $22 million $26 million Brutus Buckeye Co.  is expected to generate the above free cash flows over the next four years, after which they are expected to grow at a rate of 5% per year. If the weighted average cost of capital is 10% and the company has cash of $85 million, debt of $65 million, and 30 million shares outstanding, what is the company’s expected current share price?