Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation

image text in transcribed
image text in transcribed
4. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similiar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFs) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Tropetech Inc. has an expected net operating profit after taxes, EBrT(1 - T), of $1,200 million in the coming year, In addition, the firm is expected to have net capital expenditures of $180 mililion, and net operating working capital (NOWC) is expected to increase by $15 milion. How much free cash flow (FCF) is Tropetech Inc, expected to generate over the next year? $18,490 million $1,005 mililion $1,035 million $1,365 milion have net capital expenditures of $180 million, and net operating working capital (NowC) is expected to increase by $15 million. How much free cash flow (FCF) is Tropetech Inc. expected to generate over the next-year? $18,490 million $1,005 million $1,035 milion $1,365 million Tropetech Incis FCFs are expected to grow at a constant rate of 4.62% per year in the future. The market value of Tropetech Incis outstanding debt is $4,694 million, and its preferred stocks' value is $2,719 million. Tropetech Inc. has 225 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%. Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firm has no nonoperating assets

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Dividend Stocks For Dummies

Authors: Lawrence Carrel

1st Edition

0470466014, 978-0470466018

More Books

Students also viewed these Finance questions

Question

Differentiate the function. f ( x ) = 6 x ln(5 x ) 4 x

Answered: 1 week ago