Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Jean Jacque is evaluating Pharmet by using the FCFF valuation approach. Jean has collected the following information (currency in dollars): . . . Pharmet has
Jean Jacque is evaluating Pharmet by using the FCFF valuation approach. Jean has collected the following information (currency in dollars): . . . Pharmet has a net income of $284 million, depreciation of $99 million, capital expenditures of $170 million, and an increase in working capital of $45 million. Pharmet will finance 40 percent of the increase in net fixed assets (capital expenditures less depreciation) and 40 percent of the increase in working capital with debt financing. Interest expenses are $158 million. The current market value of Pharmet's outstanding debt is $1,826 million. FCFF is expected to grow at 6 percent indefinitely. The tax rate is 29 percent. Pharmet is financed with 35 percent debt and the rest for equity. The before tax cost of debt is 10 percent, and the before-tax cost of equity is 12 percent. Phaneuf has 10 million outstanding shares. Your task is to estimate the total value of the equity per share. . . Write your answer in decimal form and round it to two decimal places
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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