Nielson Motors (NM) is a newly public firm with 25 million shares outstanding You are doing a valuation analysis of Nielson and you estimate its free cash flow in the coming year to be $40 million You expect the firm 's free cash flows to grow by 4 per year in subsequent years Because the firm has ...

14 Calculate Company Ns equity cost of capital Step 1 Calculate the unle ...

Nielson Motors (NM) is a newly public firm with 25 million shares outstanding. You are doing a

Question:

Nielson Motors (NM) is a newly public firm with 25 million shares outstanding. You aredoing a valuation analysis of Nielson and you estimate its in the coming yearto be $40 million. You expect the firm's free cash flows to grow by 4% per year insubsequent years. Because the firm has only been listed on the stock exchange for a shorttime, you do not have an accurate assessment of Nielson's equity beta. However, you dohave the following data for another firm in the same industry:Equity Beta : 1.8
Debt Beta : 0.4
Debt-Equity Ratio : 1.5
Nielson has a much lower debt-equity ratio of .5, which is expected to remain stable, andNielson's debt is risk free. Nielson's corporate tax rate is 40%, the risk-free rate is 5%, andthe on the market is 10%.
14) Nielson's equity is closest to:
A) 14.0%
B) 14.4%
C) 12.2%
D) 11.3%
15) Nielson's share price is closest to:
A) $24.40
B) $20.80
C) $31.20
D) $27.50
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... 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...