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Attached is a homework question I am having problems with Consider HES Company's financial statements given below. Assume the Company's beta is estimated to be
Attached is a homework question I am having problems with
Consider HES Company's financial statements given below. Assume the Company's beta is estimated to be 1.5, risk free rate 2%, and market risk premium 10%. Furthermore, assume the company has a longterm growth rate for 2% after the fifth year and net income and comprehensive income will be identical. What is the company's value using the following methods, for each method and part, provide your analysis and discussion. (Answer ALL parts A-F). a) Residual Income b) Value to Book c) Free Cash Flow to Equity (FCFE) d) Free Cash Flow to Company (FCFC, Debt and Equity) e) If Owners decide to issue 1,000,000 common shares (assume no floatation cost), how much would be the value for each share? Which valuation method would you prefer, why? f) Analyze and explain which one of the above valuation methods provides a better and more realistic valuation, for an investor, an acquiring company, and a lenderStep by Step Solution
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