Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the equity of a hypothetical company, given the following information Current years reported free cash flow to equity $1,400,000 Current years normalized free cash flow to equity $1,800,000 Long term int...

There are FCFF and FCFE variations of the CCM In this problem th ...

Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the

Question:

Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the equity of a hypothetical company, given the following information:

Current year’s reported free cash flow to equity = $1,400,000 Current year’s normalized free cash flow to equity = $1,800,000
Long-term interest-bearing debt = $2,000,000
Weighted average cost of capital = 15 percent
Equity discount rate = 18 percent
Long-term growth rate of FCFE = 5.5 percent

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... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... 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...

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