Question
You predict following FCFE per share for Mackinac Co. FCFF1=4.3476 FCFF2=1.3235 FCFF3=2.3969 Mackinac's beta is 2.57. The government bond yield is
You predict following FCFE per share for Mackinac Co.
FCFF1=4.3476
FCFF2=1.3235
FCFF3=2.3969
Mackinac's beta is 2.57. The government bond yield is 8 percent, and the market equity risk premium is 7 percent. Use CAPM to compute cost of equity. The company has no debt.
The long term FCFF growth rate will start in year 5 and is estimated at 8%.
Compute the value of Mackinac's equity (firm) value. Round to the full number.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Step 1 Calculate the Cost of Equity using CAPM Given Riskfree rate Rf 8 Market risk premium Rm 7 Bet...
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Step: 2
Step: 3
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Equity Asset Valuation
Authors: Jerald E Pinto, CFA Institute
3rd Edition
1119850517, 978-1119850519
