9.

You are valuing a company at year end 2020 that has a target capital structure of 35% equity and 65% debt. The estimated cost of equity is 14% and the net cost of debt is 2.5%, respectively. The estimated stream of free cash flow to the firm(FCF)is:

Value is	2020	2021	2022	2023	2024
FCF	4000	4500	4890	5200	5600

The expected nominal growth rate of FCF in perpetuity is 1.20%. At year end 2020 the estimated level of interest bearing debt, cash, minorities and financial investments are 6000, 4000, 400 and 2750, respectively. The current market capitalization of the company is 98000. You investment recommendation is:

Select one:

a. Sell, as the estimated year end 2019 equity value is 74418

2. Buy, as the estimated year end 2019 equity value is 100184
3. Buy, as the estimated year end 2019 equity value is 116602

Sell, as the estimated year end 2019 equity value is 69260