Discounted Cash Flow Valuation Presented below are data for Rom Com Truck: Forecast Year 1 2 3 4 5 Terminal No. of outstanding shares 500 500 500 500 500 500 Terminal...

70.2K

Verified Solution

Question

Accounting

Discounted Cash Flow Valuation
Presented below are data for Rom Com Truck:
Forecast Year
1 2 3 4 5 Terminal
No. of outstanding shares 500 500 500 500 500 500
Terminal year growth rate 4%
Cost of common equity 10% 10% 10% 10% 10% 10%
Net income $79 $94 $111 $130 $150 $157
Beginning of year common equity $649 $683 $720 $758 $797 $839
Free cash flow to common equity $44 $58 $73 $90 $108 $115
Compute the value of a share of Rom Com common stock using thediscounted cash flow method.
Do not round your computations until your final answer. Roundfinal answer to two decimal places.
$????

	Forecast Year
No. of outstanding shares	500	500	500	500	500	500
Terminal year growth rate						4%
Cost of common equity	10%	10%	10%	10%	10%	10%
Net income	$79	$94	$111	$130	$150	$157
Beginning of year common equity	$649	$683	$720	$758	$797	$839
Free cash flow to common equity	$44	$58	$73	$90	$108	$115

Answer & Explanation Solved by verified expert

4.1 Ratings (807 Votes)

A B C D E F G H I J K L M 2 3 To calculate the value of common stock the free cash flow to equity should be discounted at cost of equity 4 The present value of the free cash flow to equity will be the value of the common stock 5 6 Forecast Year See Answer

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: Zin AI - Your personal assistant for all your inquiries!

Become a Member

Discounted Cash Flow Valuation Presented below are data for Rom Com Truck: Forecast Year 1 2 3 4 5 Terminal No. of outstanding shares 500 500 500 500 500 500 Terminal...

70.2K

Verified Solution

Question

Accounting

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Membership Benefits:

Other questions asked by students

What is the compound interest if 43 000 is invested for 15 years at 6...

Which of the following types of cell walls is are made up of many layers...

et the sample space be S 1 2 3 4 5 6 7 8 9...

Approximate with a polynomial in P using the inner product p g f p t...

Scoring: Your score will be based on the number of correct matches. There is no...

There are various theories that attempt to explain a firms dividend policy. Select four listed...

please make sure the answers be in details. In the expenditure cycle in...

Many companies are now outsourcing their internal audit function. What are your thoughts on this...

accounting Knowledge Check 01 Consider the following information: What is the...

Make-or-Buy Decision Make-or-Buy Decision Matchless Computer Company has been purchasing carrying cases for...

Comprehensive Problem 6 Utease Corporation has many production plants across the...

Computing Partial Period, Sum-of-the-Years'-Digits Depreciation A machine with a five-year estimated useful life...

	Forecast Year
	1	2	3	4	5	Terminal
No. of outstanding shares	500	500	500	500	500	500
Terminal year growth rate						4%
Cost of common equity	10%	10%	10%	10%	10%	10%
Net income	$79	$94	$111	$130	$150	$157
Beginning of year common equity	$649	$683	$720	$758	$797	$839
Free cash flow to common equity	$44	$58	$73	$90	$108	$115