Amarindo, Inc (AMR), is a newly public firm with 10 million shares outstanding You are doing a valuation analysis of AMR You estimate its free cash flow in the coming year to be $15 million, and you expect the firms free cash flows to grow by 4 per year in subsequent years Because the firm has only...

a From Eq 149 UAL Asset beta 12 15 12 03 090 We can ...

Amarindo, Inc. (AMR), is a newly public firm with 10 million shares outstanding. You are doing a

Question:

Amarindo, Inc. (AMR), is a newly public firm with 10 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its in the coming year to be $15 million, and you expect the firm€™s free cash flows to grow by 4% per year in subsequent years. Because the firm has only been listed on the stock exchange for a short time, you do not have an accurate assessment of AMR€™s equity beta. However, you do have beta data for UAL, another firm in the same industry:

AMR has a much lower debt-equity ratio of 0.30, which is expected to remain stable, and its debt is risk free. AMR€™s corporate tax rate is 40%, the risk-free rate is 5%, and the expected return on the market portfolio is 11%.
a. Estimate AMR€™s equity cost of capital.
b. Estimate AMR€™s shareprice.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...