Answered step by step
Verified Expert Solution
Question
1 Approved Answer
New Inc. is a listed company in Australia. Its current before interest after-tax operating cash flow is $100 million. The cash flow is expected to
New Inc. is a listed company in Australia. Its current before interest after-tax operating cash flow is $100 million. The cash flow is expected to grow at 6% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available:
Tax rate | 30% |
Risk-free rate | 4% |
Market return | 12% |
Equity beta | 2 |
Cost of debt | 7% |
D/E | 60% |
Given the above data, New Inc.s cost of equity is around:
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