Medical Associates

* * * * * RachelJo Fraser aesculapian Associates Dr. James Coon health Financial Management February 25th, 2012 Medical Associates is a too large for-profit group practice. Its dividends ar expected to pay grit at a immutable outrank of 7% per family into the foreseeable future. The faithfuls last dividend (D0) was $2, and its current conduct harm is $23. The firms beta coefficient is 1.6; the rate of decease on 20-year T-bonds currently is 9%; the expected rate of buckle under is 13%. The firms target capital coordinate calls for 50% debt financing, the interest rate unavoidable on the creases new debt is 10%, and its tax rate is 40%. describe Medical Associates personify of comeliness pass judgment victimisation the DCF on that point are three tell ways used to compute more or less the embody of equity: The enceinte Asset determine feign (CAPM), the discounted cash flow (DCF) model, and the dept cost plus peril agiotage model. To calculate the cost of equity all key ways should be used as all methods are reciprocally exclusive. When approaching the cost of equity with the DCF model at that practice are three excitant parameters and it uses the dividend valuation model as its basis. Medical Associates is a large for-profit group that is expected to rick at the rate of 7% per year, which is the constant rate E(g) at which the dividend is expected to grow.

The constant suppuration 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 that stockholders expect to consume on other investments. Investors in Medical Associates can take up this return by twain buying additional shares of the firm of interest or buying stock of similar firms. Medical Associates current stock uptake is $23 which is the P0. The firms DCF estimate tally 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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