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Using the information below, answer the questions: Firm named Galaxy has a free cash flow (FCF) of $13 million. Galaxy's net income is $50million and
Using the information below, answer the questions: Firm named Galaxy has a free cash flow (FCF) of $13 million. Galaxy's net income is $50million and total book equity is $105million Galaxy's debt-to-equity ratio is 1.25 Galaxy's market value of debt is 150 million Galaxy's tax rate is 25% Galaxy's FCF and earnings will grow at a constant rate of 3% Galaxy's equity beta is 1.3 US 3 month T-bill rate is 1.5% S&P 500 market return is 7.5% Currently Galaxy Interiors do not pay dividends. There are 10 million shares outstanding. #1) What should be the fair stock value per share using the Residual Income Model (RIM) ? #2) What should be the fair stock value per share using the Free Cash Flow (FCF) Valuation model? Using the information below, answer the questions: Firm named Galaxy has a free cash flow (FCF) of $13 million. Galaxy's net income is $50million and total book equity is $105million Galaxy's debt-to-equity ratio is 1.25 Galaxy's market value of debt is 150 million Galaxy's tax rate is 25% Galaxy's FCF and earnings will grow at a constant rate of 3% Galaxy's equity beta is 1.3 US 3 month T-bill rate is 1.5% S&P 500 market return is 7.5% Currently Galaxy Interiors do not pay dividends. There are 10 million shares outstanding. #1) What should be the fair stock value per share using the Residual Income Model (RIM) ? #2) What should be the fair stock value per share using the Free Cash Flow (FCF) Valuation model
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