Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. mexican motors' market cap is 350 billion pesos. n

Mexican Motors' market cap is 350 billion pesos. Next year's free cash flow is 9.8...

70.2K

Verified Solution

Question

Finance

Mexican Motors' market cap is 350 billion pesos. Next year's free cash flow is 9.8 billion pesos. Security analysts are forecasting that
free cash flow will grow by 8.80% per year for the next five years.
a.Assume that the 8.80% growth rate is expected to continue forever. What rate of return are investors expecting?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b-1.Mexican Motors has generally earned about 11% on book equity ( ROE=11%) and reinvested 50% of earnings. The remaining 50% of
earnings has gone to free cash flow. Suppose the company maintains the same ROE and investment rate for the long run. What will be
the growth rate of earnings?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.
b-2.What would be the rate of return?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
image

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students