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plz You are in your first year as financial analyst within a large corporation which is considering a new acquisition (TagCo)to support its long term
plz You are in your first year as financial analyst within a large corporation which is considering a new acquisition (TagCo)to support its long term growth.You have been given the following information on TagCo:
- Current Free Cash Flow to the Firm (FCFF) =$745 millions
- Outstanding shares= 309.39 million
- Equity beta = 0.90, risk-free rate = 5.04%; equity risk premium = 5.5%
- Cost of debt = 7.1%
- Marginal tax rate = 34%
- Capital structure: 20% debt, 80% equity
- Long-term debt = $1.518 billion
- Growth rate of FCFF =
- 8.8% annually in years 1-4;
- 7.4% in year 5, 6.0% in year 6, 4.6% in year 7;
- 3.2% in year 8 and thereafter.
Required:
From the information provided to you above, estimate the following:
a) TagCoWeighted Average Cost of Capital (WACC);
b) Total value of the firm;
c) Total value of equity;
d) Value per share.
Show all your calculations to derive the above estimates.
- Thats all the info we have .....
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