McKenzie, Inc

question 49

Multiple Choice

McKenzie, Inc. reported net income of $10 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% for the foreseeable future. McKenzie faces a 40% tax rate and has a 0.50 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% and the market risk premium is estimated to be 7.5%. McKenzie has 10 million shares of common stock outstanding. What is the current value of a share of McKenzie stock?

• A) $6.62
• B) $7.32
• C) $8.45
• D) $9.95
• E) $10.25

---

Definitions:

Government Policy

The plans and actions taken by a government to achieve particular objectives, which can encompass a wide range of issues including economic, social, and foreign policy.

Environmental Damage

The detrimental impact on nature and the environment, including ecosystems, biodiversity, and human health, caused by human activities.

Semideveloped Countries

Nations that are in a transitional phase between developing and developed status, characterized by improving but not yet fully developed economic, social, and political systems.

Charles Darwin

A 19th-century naturalist and geologist known for his theory of evolution through natural selection.