Question Two: For the following stable growth firm , calculate: Cost of equity using CAPM, having risk
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Question:
Question Two:
- For the following stable growth firm, calculate:
- Cost of equity using CAPM, having risk free rate to be 2%, market risk premium 8%, and equity beta 1.4
(1 mark)
- Current growth rate with the required rate of return on equity of 12% and retention ratio of 70%.
(1 mark)
- Estimate the current share price having current year EPS to be $1.6
(2 mark)
- Discuss for which firms EBITDA can be used, instead of FCF, for investment analysis and valuations and why?
(2 marks)
- Explain how EBITDA multiple can be calculated for a private company valuation.
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