Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5 . You have the following information to determine the per share value of a stock using the free cash flow ( FCF ) method

5. You have the following information to determine the per share value of a stock using the free cash flow (FCF) method of valuation:
The firm has 1.852 billion shares outstanding.
The market value of its debt is $3.192 billion.
The free cash flow is currently $1.1559 billion.
The firms equity beta is 0.90; the equity risk premium is 5.5%; the risk-free rate is 5.5%.
The before-tax cost of debt is 7%.
The tax rate is 40%.
The firm has a capital structure of 75% equity and 25% debt.
The FCF rate of growth is 3%.
Based on the above information, calculate the following:
a. WACC
b. Value of the firm (using the WACC as the discount rate)
c. Total market value of equity
d. Value per share

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions