Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

what formula/formulas do i need to use to answer a question requesting that Iuse the WACC method, and perform the valuation of equity on a

what formula/formulas do i need to use to answer a question requesting that Iusethe WACC method, and perform the valuation of equity on a company for multiple years? I have been given free cash flow amounts, cash flow to equity holders, interest expenses, effective tax rates for each year.

Other key information:

2. Required return on levered equity is assumed to be constant at 13.3%.

3. Required return on debt is assumed to be constant at 9.0%.

4. The market value of debt, which is assumed to be the same as book value, is 1,184 million at the end of 2012. The market value of equity at the end of 2012 is 1,490 million.

5. The WACC is assumed to remain constant from 2019.

6. The effective tax rate is assumed to be constant at 35.0% from 2019.

7. Note that change in debt can be calculated as = cash flow to equity free cash flow + after tax interest expenses.

8. Equity value in year t can be calculated as = equity value in year t-1 multiplied by (required return + 1) cash to equityholder.

9. Free cash flow is expected to grow at a constant rate of 2.0% from 2019.

I don't require this question to be worked out only the formulas

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Trade Finance

Authors: Tarsem Bhogal, Arun Trivedi

2nd Edition

303024542X, 9783030245429

More Books

Students also viewed these Finance questions

Question

2. Are there more men or women? (find statistics)

Answered: 1 week ago

Question

understand how design and writing connect in mass communication.

Answered: 1 week ago

Question

Who is the audience?

Answered: 1 week ago