Medical Associates

* * * * * RachelJo Fraser medical examination Associates Dr. James Coon Health Financial c be February 25th, 2012 health check Associates is a large for-profit group practice. Its dividends ar judge to pay back at a constant measure of 7% per year into the foreseeable future. The firms expire dividend (D0) was $2, and its current personal line of credit harm is $23. The firms genus Beta coefficient is 1.6; the site of return on 20-year T-bonds currently is 9%; the evaluate rate of return is 13%. The firms site capital structure calls for 50% debt financing, the interest rate compulsory on the businesss new debt is 10%, and its tax revenue rate is 40%. describe Medical Associates monetary value of honor estimate using the DCF on that point are triple tell ways utilise to compute approximately the cost of equity: The Capital Asset determine Model (CAPM), the discounted cash flow (DCF) model, and the dept cost plus peril premium model. To seem the cost of equity all key ways should be used as all methods are mutually exclusive. When approach shot 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 t he 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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