Question 1 Problem 1 - Using FCFE It is 12/31/15. The following data have been accumulated from analysis of...

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Finance

Question 1
Problem 1 - Using FCFE
It is 12/31/15.  The following data havebeen accumulated from analysis of Frank
Beamer Incorporated:
1 2 3
2016E 2017E 2018E
Annual FCFE $         120,000 $      160,000 $          180,000
Given: ?
? ?
Net Debt $         500,000
Shares Outstanding             200,000
Stock Price per share $             15.00
Effective Tax Rate 30.0%
WACC 8.0%
Beta 1.10
Risk Free Rate 4.00%
Equity Risk Premium 6.00%
Terminal Growth Rate 5.0%
? ?
Calculate the Equity Value per Share for FrankBeamer Incorporated
as of 12/31/15 using the Free Cash Flows to EquityApproach.
Is the stock current over or under valued?
As you work through the problem, fill in thefollowing numbers:
Show work for partial credit.
Frank Beamer cost of equity 10.600%
Frank Beamer WACC 8%
Terminal Value in 2018 (Gordon Growth) ?
Enterprise Value ?
Equity Value ?
Equity Value per Share ?
Stock over or under valued? ?
Question 2
Problem 1 - using FCFF
It is 12/31/15.  The following data havebeen accumulated from analysis of Frank
Beamer Incorporated:
1 2 3
2016E 2017E 2018E
Annual FCFF $         120,000 $      160,000 $          180,000
Given: ?
? ?
Net Debt $         500,000
Shares Outstanding             200,000
Stock Price per share $             15.00
Effective Tax Rate 30.0%
WACC 8.0%
Beta 1.10
Risk Free Rate 4.00%
Equity Risk Premium 6.00%
Terminal Growth Rate 5.0%
? ?
Calculate the Equity Value per Share for FrankBeamer Incorporated
as of 12/31/15 using the Free Cash Flows to theFirm Approach.
Is the stock current over or under valued?
As you work through the problem, fill in thefollowing numbers:
Show work for partial credit.
Frank Beamer cost of equity ?
Frank Beamer WACC 8%
Terminal Value in 2018 (Gordon Growth) ?
Enterprise Value ?
Equity Value ?
Equity Value per Share ?
Stock over or under valued? ?

Answer & Explanation Solved by verified expert

3.6 Ratings (606 Votes)

1 Valuation using FCFE approach Cost of equity ke riskfree rate betarisk premium 4 1106 106 Year 2016E 2017E 2018E 2019 onwards Formula Time period n 1 2 3 Terminal Growth rate g 5 Annual FCFE 120000 160000 180000 189000 Terminal FCFEkeg ke 1060 g 5 See Answer

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Question 1Problem 1 - Using FCFEIt is 12/31/15. The following data havebeen accumulated from analysis of FrankBeamer Incorporated:1232016E2017E2018EAnnual FCFE$ 120,000$ 160,000$ 180,000Given:???Net Debt$ 500,000Shares Outstanding 200,000Stock Price per share$ 15.00Effective Tax Rate30.0%WACC8.0%Beta1.10Risk Free Rate4.00%Equity Risk Premium6.00%Terminal Growth Rate5.0%??Calculate the Equity Value per Share for FrankBeamer Incorporatedas of 12/31/15 using the Free Cash Flows to EquityApproach.Is the stock current over or under valued?As you work through the problem, fill in thefollowing numbers:Show work for partial credit.Frank Beamer cost of equity10.600%Frank Beamer WACC8%Terminal Value in 2018 (Gordon Growth)?Enterprise Value?Equity Value?Equity Value per Share?Stock over or under valued??Question 2Problem 1 - using FCFFIt is 12/31/15. The following data havebeen accumulated from analysis of FrankBeamer Incorporated:1232016E2017E2018EAnnual FCFF$ 120,000$ 160,000$ 180,000Given:???Net Debt$ 500,000Shares Outstanding 200,000Stock Price per share$ 15.00Effective Tax Rate30.0%WACC8.0%Beta1.10Risk Free Rate4.00%Equity Risk Premium6.00%Terminal Growth Rate5.0%??Calculate the Equity Value per Share for FrankBeamer Incorporatedas of 12/31/15 using the Free Cash Flows to theFirm Approach.Is the stock current over or under valued?As you work through the problem, fill in thefollowing numbers:Show work for partial credit.Frank Beamer cost of equity?Frank Beamer WACC8%Terminal Value in 2018 (Gordon Growth)?Enterprise Value?Equity Value?Equity Value per Share?Stock over or under valued??


Problem 1 - Using FCFE

It is 12/31/15. The following data havebeen accumulated from analysis of Frank
Beamer Incorporated:
	1	2	3
	2016E	2017E	2018E
Annual FCFE	$ 120,000	$ 160,000	$ 180,000






Given:	?
?	?
Net Debt	$ 500,000
Shares Outstanding	200,000
Stock Price per share	$ 15.00
Effective Tax Rate	30.0%
WACC	8.0%
Beta	1.10
Risk Free Rate	4.00%
Equity Risk Premium	6.00%
Terminal Growth Rate	5.0%
?	?


Calculate the Equity Value per Share for FrankBeamer Incorporated
as of 12/31/15 using the Free Cash Flows to EquityApproach.
Is the stock current over or under valued?
As you work through the problem, fill in thefollowing numbers:
Show work for partial credit.

Frank Beamer cost of equity	10.600%
Frank Beamer WACC	8%
Terminal Value in 2018 (Gordon Growth)	?
Enterprise Value	?
Equity Value	?
Equity Value per Share	?
Stock over or under valued?	?


Problem 1 - using FCFF

It is 12/31/15. The following data havebeen accumulated from analysis of Frank
Beamer Incorporated:
	1	2	3
	2016E	2017E	2018E
Annual FCFF	$ 120,000	$ 160,000	$ 180,000






Given:	?
?	?
Net Debt	$ 500,000
Shares Outstanding	200,000
Stock Price per share	$ 15.00
Effective Tax Rate	30.0%
WACC	8.0%
Beta	1.10
Risk Free Rate	4.00%
Equity Risk Premium	6.00%
Terminal Growth Rate	5.0%
?	?


Calculate the Equity Value per Share for FrankBeamer Incorporated
as of 12/31/15 using the Free Cash Flows to theFirm Approach.
Is the stock current over or under valued?
As you work through the problem, fill in thefollowing numbers:
Show work for partial credit.

Frank Beamer cost of equity	?
Frank Beamer WACC	8%
Terminal Value in 2018 (Gordon Growth)	?
Enterprise Value	?
Equity Value	?
Equity Value per Share	?
Stock over or under valued?	?