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Amarindo, Inc. (AMR), is a newly public firm with 9.5 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its free

Amarindo, Inc. (AMR), is a newly public firm with 9.5 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its free cash flow in the coming year to be $15.37 million, and you expect the firm's free cash flows to grow by 4.3 % per year in subsequent years. Because the firm has only been listed on the stock exchange for a short time, you do not have an accurate assessment of AMR's equity beta. However, you do have beta data for UAL, another firm in the same industry: LOADING.... AMR has a much lower debt-equity ratio of 0.42 , which is expected to remain stable, and its debt is risk free. AMR's corporate tax rate is 32 %, the risk-free rate is 5.2 %, and the expected return on the market portfolio is 11.4 %. a. Estimate AMR's equity cost of capital. b. Estimate AMR's share price.

Table

Equity Beta

Debt Beta

Debt-Equity Ratio

UAL

2.10

0.42

1.4

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