Question
You have the following information to determine the per share value of a stock using the free cash flow (FCF) method of valuation: The firm
You have the following information to determine the per share value of a stock using the free cash flow (FCF) method of valuation: The firm has 1.852 billion shares outstanding. The market value of its debt is $3.192 billion. The free cash flow is currently $1.1559 billion. The firms equity beta is 0.90; the equity risk premium is 5.5%; the risk-free rate is 5.5%. The before-tax cost of debt is 7%. The tax rate is 40%. The firm has a capital structure of 75% equity and 25% debt. The FCF rate of growth is 3%. Based on the above information, calculate the following: a. WACC Answer in percent to two decimal places. b. Value of the firm (using the WACC as the discount rate) Answer in percent to two decimal places. c. Total market value of equity Answer in billions of dollars to three decimal places. d. Value per share Answer in dollars to two decimal places.
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