McKenzie, Inc

question 54

Multiple Choice

McKenzie, Inc., reported EBIT of $8.5 million for last year. Depreciation expense totaled $5 million and capital expenditures came to $2 million. Free cash flow is expected to grow at a rate of 2.5% for the foreseeable future. McKenzie faces a 21 percent tax rate and has a .50 debt to equity ratio with $20 million (market value) in debt outstanding. McKenzie's equity beta is 1.4, the risk-free rate is currently 5 percent and the market risk premium is estimated to be 7.5 percent. McKenzie has 10 million shares of common stock outstanding. What is the current value of a share of McKenzie stock (in millions) ?

• A)$6.62
• B)$7.32
• C)$8.45
• D)$9.76
• E)$10.25

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Definitions:

Metamemory

An individual's awareness and understanding of their own memory capabilities and strategies to enhance memory performance.

Rehearsal

The cognitive process of repeatedly practicing or going over information to aid in its retention and recall.

Elaboration

The process of adding more information to or providing additional details on a subject.

Bodily-kinesthetic

Intelligence that pertains to the ability to control physical motion and handle objects skillfully, as posited by Howard Gardner's theory of multiple intelligences.