Watson Dunn is planning to value BCC Corporation, a provider of a variety of industrial metals and
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Watson Dunn is planning to value BCC Corporation, a provider of a variety of industrial metals and minerals. Dunn uses a single - stage FCFF approach. The financial information
Dunn has assembled for his valuation is as follows:
- The company has 1,852 million shares outstanding.
- The market value of its debt is $ 3.192 billion.
- The FCFF is currently $ 1.1559 billion.
- The equity beta is 0.90; the equity risk premium is 5.5 percent; the risk - free rate is 5.5 percent.
- The before - tax cost of debt is 7.0 percent.
- The tax rate is 40 percent.
- To calculate WACC, he will assume the company is financed 25 percent with debt.
- The FCFF growth rate is 4 percent.
Using Dunn’s information, calculate the following:
A. WACC.
B. Value of the firm.
C. Total market value of equity.
D. Value per share.
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...
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Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
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