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Valuation of the Firm (By Aswath Damodaran, 3rd edtion) Chapter 14 (AD) FCFE 14-2 Kimberly-Clark is a household product manufacturer It reported earnings per share
Valuation of the Firm (By Aswath Damodaran, 3rd edtion) | ||||||||
Chapter 14 (AD) | ||||||||
FCFE | ||||||||
14-2 | Kimberly-Clark is a household product manufacturer | |||||||
It reported earnings per share (EPS) of $ 3.20 in 1993. | ||||||||
it paid dividends per share (DPS)of $ 1.70 in that year. | ||||||||
The firm reported depreciation of $ 315 million in 1993 and | ||||||||
Capital Exp of $ 474 million. | ||||||||
There were 160 million shares outstanding, trading at $ 51 per share. | ||||||||
This ratio of cap ex to depreciation is expectedt to be maintained in the long term. | ||||||||
Woking capital needs are negligible. | ||||||||
Kimberly-clark had debt outstanding of $ 1.60 billion. | ||||||||
It intended to maintain its current financing mix of debt and equity to | ||||||||
finance future investment needs. | ||||||||
The firm was in the steady state and earnigns were expected to | ||||||||
grow 7% a year. | ||||||||
The stock had a beta of 1.05. | ||||||||
The T-Bond rate was 6.25%. | ||||||||
The Risk premium was 5.5%. | ||||||||
a) | Estimate the value per share, using the DDM. | |||||||
b) | Estimate the value per share, using the FCFE model. | |||||||
c) | How would you explain the difference between the models? | |||||||
Which one would you use as your benchmark for comparison to the market price? |
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