Standard,Inc

question 4

Multiple Choice

Standard,Inc.reported net income of $35 million for last year.Depreciation expense totaled $20 million and capital expenditures came to $7 million.Free cash flow is expected to grow at a rate of 6% for the foreseeable future.Stuart faces a 40% tax rate and has a 0.40 debt to equity ratio with $120 million (market value) in debt outstanding.Standard's equity beta is 1.25,the risk-free rate is currently 5% and the market risk premium is estimated to be 7.5%.What is the current value (in millions) of Standard's equity?

• A) $237.34
• B) $352.42
• C) $427.42
• D) $556.79
• E) $655.55

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Definitions:

Fortune 500 Companies

An annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years.

Licensing

The granting of permission by the owner of a brand, patent, or trademark to another party, allowing them to make, use, or sell a product under certain conditions.

International Markets

Markets that span across countries and continents, allowing for the trading and selling of goods and services globally.

Research and Development Costs

Expenses related to the investigation and discovery of new knowledge, products, or processes, which can improve a company's future performance and competitiveness.