Chapter 9 Corporate Valuation and Financial Planning

Question 1

5 Uses of FCF

Answer 1

1) Pay dividends
2) Repurchase Stock
3) Pay net after tax interest on debt
4) Repay debt
5) Purchase financial assets

Question 2

Intrinsic Value of the Stock Price

Answer 2

1) Estimated value of operations
2) Current levels of short-term investments, debt, and preferred stock
3) The number of common shares

Question 3

Additional Funds Needed Equation

Answer 3

Required increase in assets - increase in spontaneous liabilities - increase in retained earnings.