Medical Associates

* * * * * RachelJo Fraser checkup Associates Dr. James Coon Health Financial concern February 25th, 2012 health check Associates is a large for-profit group practice. Its dividends ar pass judgment to pay back at a constant value of 7% per year into the foreseeable future. The firms outlive dividend (D0) was $2, and its current investment firm harm is $23. The firms important coefficient is 1.6; the valuate of return on 20-year T-bonds currently is 9%; the pass judgment rate of return is 13%. The firms purpose capital structure calls for 50% debt financing, the interest rate take on the businesss new debt is 10%, and its levy rate is 40%. describe Medical Associates salute of equity estimate using the DCF on that point atomic number 18 trey tell ways apply to compute approximately the cost of equity: The Capital Asset determine Model (CAPM), the discounted currency flow (DCF) model, and the dept cost plus peril pre mium model. To channelise the cost of equity all key ways should be used as all methods are mutually exclusive. When come near the cost of equity with the DCF model at that place are three input parameters and it uses the dividend valuation model as its basis. Medical Associates is a large for-profit group that is judge to grow at the rate of 7% per year, which is the constant rate E(g) at which the dividend is expected to grow. The constant growth model can be used E(Re) = D0 x [1+E(g)] + E(g) P0 = E(D1) + E(g) P(0) The required rate of return on equity, the R(Re) is the rate that stockholders expect to earn on other investments. Investors in Medical Associates can earn this return by both purchasing additional shares of the firm of interest or purchasing stock of similar firms. Medical Associates current stock expenditure is $23 which is the P0. The firms DCF estimate according the DCF model is: R(Re) = E(D1) + E(g) P0 = $2.00 x (1+0.07) + 7% ! $23 = 9.3% + 7% = 16.3% Thus, the Medical Associates DCF estimate is...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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