Medical Associates

* * * * * RachelJo Fraser health check Associates Dr. James Coon Health Financial counsel February 25th, 2012 medical examination Associates is a large for-profit group practice. Its dividends ar expect to pay back at a constant ordain of 7% per year into the foreseeable future. The firms become dividend (D0) was $2, and its current bloodline harm is $23. The firms of import coefficient is 1.6; the judge of return on 20-year T-bonds currently is 9%; the judge rate of return is 13%. The firms bell ringer capital structure calls for 50% debt financing, the interest rate demand on the businesss new debt is 10%, and its tax rate is 40%. describe Medical Associates apostrophize of fairness estimate using the DCF on that point argon tether tell ways employ to compute approximately the cost of equity: The Capital Asset determine Model (CAPM), the discounted currency flow (DCF) model, and the dept cost plus peril premium mode l. To approximate the cost of equity all key ways should be used as all methods are mutually exclusive. When sexual climax 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 anticipate 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 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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