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Use the below information to value a mature levered company with growing annual perpetual cash flows and a constant debt-to-assets ratio. The next cash flow
Use the below information to value a mature levered company with growing annual perpetual cash flows and a constant debt-to-assets ratio. The next cash flow will be generated in one year from now, so a perpetuity can be used to value this firm. The firm's debt funding comprises annual fixed coupon bonds that all have the same seniority and coupon rate. When these bonds mature, new bonds will be re-issued, and so on in perpetuity. The yield curve is flat. Item abbreviation OFCF1 EFCF1 g WACCBefore Tax rD rE DIV nShares tc Data on a Levered Firm with Perpetual Cash Flows Value Item full name $109.2m Operating free cash flow at time 1 $98.4m Equity free cash flow at time 1 3% pa Growth rate of OFCF, FFCF, EFCF and Debt cash flow 8.9% pa Weighted average cost of capital before tax 5% pa Bond yield 44% pa Cost or required return of levered equity 90% pa Debt to assets ratio, where the asset value includes tax shields 21m Number of shares 30% Corporate tax rate The firm's current share price is: Select one: O a. $11.4286 O b. $14.7215 o c. $26.1501 O d. $52.6485 o e. $88.1356
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