MedCorp's free cash flow to equity is P350 million and the firm's net debt increased by 20 million. It is reported that the firm's interest expense is P48 milion and it is assumed that its tax rate is 20%. The market capitalisation rate is 18% Calculate the Free Cash Flow to the Firm (FCFF) and market value of equity if its payout ratio is assumed to be 0.45 and the return on equity is 30% ? The weighted average cost of capital is estimated to be 18%. [Assume the free cash flow to equity grows indefinitely at the projected growth rate.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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MedCorp's free cash flow to equity is P350 million and the firm's net debt increased by 20 million. It is
reported that the firm's interest expense is P48 milion and it is assumed that its tax rate is 20%. The
market capitalisation rate is 18% Calculate the Free Cash Flow to the Firm (FCFF) and market value of
equity if its payout ratio is assumed to be 0.45 and the return on equity is 30 %? The weighted average
cost of capital is estimated to be 18%. [Assume the free cash flow to equity grows indefinitely at the
projected growth rate.
Transcribed Image Text:MedCorp's free cash flow to equity is P350 million and the firm's net debt increased by 20 million. It is reported that the firm's interest expense is P48 milion and it is assumed that its tax rate is 20%. The market capitalisation rate is 18% Calculate the Free Cash Flow to the Firm (FCFF) and market value of equity if its payout ratio is assumed to be 0.45 and the return on equity is 30 %? The weighted average cost of capital is estimated to be 18%. [Assume the free cash flow to equity grows indefinitely at the projected growth rate.
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