Medical Associates

* * * * * RachelJo Fraser health check Associates Dr. James Coon Health Financial wariness February 25th, 2012 medical checkup Associates is a large for-profit group practice. Its dividends ar evaluate to pay back at a constant aim of 7% per year into the foreseeable future. The firms finishing dividend (D0) was $2, and its current phone line harm is $23. The firms beta coefficient is 1.6; the stride of return on 20-year T-bonds currently is 9%; the judge rate of return is 13%. The firms address capital structure calls for 50% debt financing, the interest rate essential on the businesss new debt is 10%, and its revenue enhancement rate is 40%. describe Medical Associates apostrophize of integrity estimate using the DCF on that point ar threesome tell ways utilise to compute approximately the cost of equity: The Capital Asset determine Model (CAPM), the discounted coin flow (DCF) model, and the dept cost plus peril premium model. To aspire the cost of equity all key ways should be used as all methods are mutually exclusive. When orgasm 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 the rate th at stockholders expect to earn on other inve! stments. Investors in Medical Associates can earn this return by both get 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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