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You are valuing a company at year end 2019 that has a target capital structure of 60% equity and 40% debt. The estimated cost of
You are valuing a company at year end 2019 that has a target capital structure of 60% equity and 40% debt. The estimated cost of equity is 14% and the net cost of debt is 2.5%, respectively. The estimated stream of free cash flow to the firm(FCF)is: Value is 2019E 2020E 2021E 2022E 2023E FCF 2000 2400 2800 3200 3700 The expected nominal growth rate of FCF in perpetuity is 1.25%. At year end 2019 the estimated level of interest bearing debt, cash, minorities and financial investments are 6000, 7000, 400 and 1000, respectively. The current market capitalization of the company is 41000.You investment recommendation is: Select one: a. Sell, as the estimated year end 2019 equity value is 41098 b. Buy, as the estimated year end 2019 equity value is 43250 c. Buy, as the estimated year end 2019 equity value is 43767 d. Sell, as the estimated year end 2019 equity value is 29250
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