The following questions are based on a stock and its derivatives. Relevant information is listed in the Table below. Fundamental information Number of shares outstanding Debt-to-capital ratio Current dividend Retention ratio Current free cash flow to the firm (FCFF) Market information Market value of debt Tax rate Estimations of equity analysts Long-term growth of FCFF Short-term return on equity (ROE) for the first 2 years Long-term return on equity (ROE) Required return of debt Required return of equity 50,000 25% £1 40% £60,000 £2,000,000 30% 10% 30% 20% 5% 15% (b) Another equity analyst applies the FCFF model to evaluate the stock price. Show his price determination.
The following questions are based on a stock and its derivatives. Relevant information is listed in the Table below. Fundamental information Number of shares outstanding Debt-to-capital ratio Current dividend Retention ratio Current free cash flow to the firm (FCFF) Market information Market value of debt Tax rate Estimations of equity analysts Long-term growth of FCFF Short-term return on equity (ROE) for the first 2 years Long-term return on equity (ROE) Required return of debt Required return of equity 50,000 25% £1 40% £60,000 £2,000,000 30% 10% 30% 20% 5% 15% (b) Another equity analyst applies the FCFF model to evaluate the stock price. Show his price determination.
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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Transcribed Image Text:The following questions are based on a stock and its derivatives. Relevant information
is listed in the Table below.
Fundamental information
Number of shares outstanding
Debt-to-capital ratio
Current dividend
Retention ratio
Current free cash flow to the firm (FCFF)
Market information
Market value of debt
Tax rate
Estimations of equity analysts
Long-term growth of FCFF
Short-term return on equity (ROE) for the first 2 years
Long-term return on equity (ROE)
Required return of debt
Required return of equity
50,000
25%
£1
40%
£60,000
£2,000,000
30%
10%
30%
20%
5%
15%
(b) Another equity analyst applies the FCFF model to evaluate the stock price. Show
his price determination.
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