Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Calculate the valuation of ABC industries using a free cash flow model, given the information below. Comment on whether you should invest in the shares
| Calculate the valuation of ABC industries using a free cash flow model, given the information below. | |
| Comment on whether you should invest in the shares and why | |
| ABC Industries (amounts are in millions) | |
| MV Equity | $ 500 |
| MV debt | $ 200 |
| Shares | 5.00 |
| Cash | $ 50 |
| Free cash Flow (0) | $ 55 |
| Growth next 2 years | 12.50% |
| Growth year 3 and beyond | 3.00% |
| Beta ABC | 1.30 |
| Risk Free Rate | 3.50% |
| Market Risk Premium | 7.00% |
| Price Bonds | $ 1,050.00 |
| Face Bonds | $ 1,000.00 |
| Maturity Bonds (years) | 10.00 |
| Coupon | 6.00% |
| Tax rate | 25% |
| Share Price | $ 100.00 |
| Interest | Annual |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Finance For Beginners
Authors: Shlomo Simanovsky
1st Edition
1936703009
