Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 1) assume there is a company with (all next years

1) Assume there is a company with (all next years estimates): EBIT of $6,500,000. A...

70.2K

Verified Solution

Question

Finance

1) Assume there is a company with (all next years estimates): EBIT of $6,500,000. A tax rate of 25% Depreciation expenses of $250,000. Capital expenditures of $300,000. Net Working capital last year of $700,000 and this coming year of $850,000.

Assume the company has capital components: Debt of $20,000,000. Assume if the company were to issue debt or take out a loan the interest cost would be 6.5%. 80,000 preferred share outstanding trading at $25/per share and a $1.80 annual dividend. The book value of Common equity is $50,000,000. Their common shares trade at $60/per share in the market and there are 1,500,000 shares outstanding. Assume the company has a beta of 1.1. The risk-free rate is 3% (on 10-year US Treasuries) and the market risk premium is 4.50%.

1)->What is this companys WACC? ->What is this companys intrinsic enterprise value (total Firm Value) assuming free cash flow is expected to grow at a 3% rate into perpetuity? (looking for the FCF valuationnot the current market value of all the capital components!)

2)->What is this companys intrinsic value per common share based on your estimate above?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students