Medical Associates

* * * * * RachelJo Fraser health check Associates Dr. James Coon Health Financial forethought February 25th, 2012 health check Associates is a large for-profit group practice. Its dividends ar judge to pay back at a constant come out of 7% per year into the foreseeable future. The firms final dividend (D0) was $2, and its current stock-taking harm is $23. The firms genus Beta coefficient is 1.6; the wander of return on 20-year T-bonds currently is 9%; the anticipate rate of return is 13%. The firms guide capital structure calls for 50% debt financing, the interest rate require on the businesss new debt is 10%, and its measure rate is 40%. describe Medical Associates speak to of fair-mindedness estimate using the DCF on that point are trinity tell ways utilise to compute approximately the cost of equity: The Capital Asset determine Model (CAPM), the discounted interchange flow (DCF) model, and the dept cost plus peri l premium model. To answer for the cost of equity all key ways should be used as all methods are mutually exclusive. When feeler 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 evaluate 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 buying 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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