ou 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 firm’s 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: WACC Value of the firm (using the WACC as the discount rate) Total market value of equity Value per share
ou 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 firm’s 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: WACC Value of the firm (using the WACC as the discount rate) Total market value of equity Value per share
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
Problem 1PS
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- 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 firm’s 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:
- WACC
- Value of the firm (using the WACC as the discount rate)
- Total market value of equity
- Value per share
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