Assignment covering multiples, cost of equity, cost of capital, terminal value, DCF, FCFF estimation

EV = P*shares outstanding + debt cash

Estimate EV/EBITDA ratio of Company B and Company C

Take average of EV/EBITDA of Company B and Company C

Based on average EV/EBITDA, estimate the price of Company A

Compare the price with the current price of Company A and comment if the stock is over or under priced

Quesiton:

An investor is planning to value company A. After careful estimation of cash flows, he projects the following cash flows for the firm in the following 5 years as.

Year 1: FCFF_1 = $50

Year 2: FCFF_2 = $60

Year 3: FCFF_3 = $70

Year 4: FCFF_4 = $80

Year 5: FCFF_5 = $90

The risk free rate of return is 3%, equity risk premium (market premium) is 6%. Beta is 1.2. For the terminal value, he assumes a perpetual growth rate of 3%. The corporate tax rate is 25%, and equity and debt is in equal proportion in the firm and the cost of debt borrowing is 10%. Estimate the value of the firm.

Year 1: FCFF_1 = $50

Year 2: FCFF_2 = $60

Year 3: FCFF_3 = $70

Year 4: FCFF_4 = $80

Year 5: FCFF_5 = $90

The risk free rate of return is 3%, equity risk premium (market premium) is 6%. Beta is 1.2. For the terminal value, he assumes a perpetual growth rate of 3%. The corporate tax rate is 25%, and equity and debt is in equal proportion in the firm and the cost of debt borrowing is 10%. Estimate the value of the firm.

.

XYZ Corporation is projecting its Free Cash Flow to the Firm (FCFF) for the next 5 years. The FCFF projections are as follows:

Year 1: FCFF_1 = $40

Year 2: FCFF_2 = $55

Year 3: FCFF_3 = $70

Year 4: FCFF_4 = $85

Year 5: FCFF_5 = $100

Other information:

The risk-free rate (rf) is 4%.

Equity risk premium or market premium(ERP) is 7%.

Beta () of the company is 1.5.

The corporate tax rate (T) is 30%.

The company's debt carries an interest rate of 8%.

Equity and debt are in equal proportion in the firm.

The terminal growth rate (g) is 4%.

Calculate the estimated value of the firm using the DCF model.

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Let us suppose you now have to estimate FCFF

ABC Corp. has provided the following financial information for the year:

Earnings Before Interest and Taxes (EBIT): $150 million

Tax Rate: 25%

Capital Expenditures (CapEx): $30 million

Changes in Net Working Capital (NWC): $15 million

Depreciation : $ 20 million

FCFF= EBIT(1Tax Rate) + Depreciation CapEx NWC

Please Answser for this assingment

- How does the stock price of Company A looks relative to its