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We have collected the following information from NFF Corporation: The firm has 650 million in interest-bearing debt on its books, on which it pays
We have collected the following information from NFF Corporation: The firm has 650 million in interest-bearing debt on its books, on which it pays 25 million in annual interest expenses. The average maturity of the debt is 6 years. The bond rating for the firm is A-, and the default spread over the risk- free rate is 3%. The average unlevered beta for other shipping firms is 0.80. The risk-free rate is 4.2% and the market risk premium is 4.47%. The marginal tax rate is 35%. The revenue of the firm is $280 million, the costs of goods sold are $15 million, and depreciation is $2.5 million. Capital expenditure equals depreciation and the expected change in the company's NWC is zero. Free Cash Flow is expected to grow at a 3% rate for the coming 5 years and 2% afterwards. There are 200 million shares outstanding, trading at 10 a share in the stock market. Given your valuation of the company, would you buy NFF Corporation shares in the stock market? You must show all your calculations.
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To determine whether it is advisable to buy shares of NFF Corporation in the stock market we need to perform a valuation analysis We will use the discounted cash flow DCF method to estimate the intrin...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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