Proust Company has FCFF of $1.7 billion and FCFE of $1.3 billion. Proust's WACC is 11 percent and its required rate of return for equity is 13 percent. FCFF is expected to grow forever at 7 percent and FCFE is expected to grow forever at 7.5 percent. Proust has debt outstanding of $15 billion. A. What is the total value of Proust's equity using the FCFF valuation approach? B. What is the total value of Proust's equity using the FCFE valuation approach?

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Proust Company has FCFF of $1.7 billion and FCFE of
$1.3 billion. Proust's WACC is 11 percent and its
required rate of return for equity is 13 percent. FCFF is
expected to grow forever at 7 percent and FCFE is
expected to grow forever at 7.5 percent. Proust has
debt outstanding of $15 billion.
A. What is the total value of Proust's equity using the
FCFF valuation approach?
B. What is the total value of Proust's equity using the
FCFE valuation approach?
Transcribed Image Text:Proust Company has FCFF of $1.7 billion and FCFE of $1.3 billion. Proust's WACC is 11 percent and its required rate of return for equity is 13 percent. FCFF is expected to grow forever at 7 percent and FCFE is expected to grow forever at 7.5 percent. Proust has debt outstanding of $15 billion. A. What is the total value of Proust's equity using the FCFF valuation approach? B. What is the total value of Proust's equity using the FCFE valuation approach?
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