Please help!
Union Pacific Railroad reported net income of $770 million
in 1993 after interest expenses of $320 million. (The corporate tax
rate was 36%.) It reported depreciation of $960 million in that
year, and capital spending was $1.2 billion. The firm also had S4
billion in debt outstanding on the books, rated AA (carrying a
yield to maturity of 8%) and trading at par (up from $3.8 billion
at the end of 1992). The beta of the stock was 1.05, and there were
200 million shares outstanding (trading at $60 per share) with a
book value of $5 billion. Union Pacific's working capital
requirements were negligible. (The Treasury bond rate was 7%, and
the risk premium was 5.5%.)
a. Estimate the free cash flow to the firm in 1993.
b. Estimate the value of the firm at the end of 1993.
Please help! Union Pacific Railroad reported net income of $770 million in 1993 after interest expenses of $320 million.
-
- Site Admin
- Posts: 899603
- Joined: Mon Aug 02, 2021 8:13 am