XYZ Company is interested in acquiring ABC Company, ABC Company has two million shares outstanding,...
80.2K
Verified Solution
Link Copied!
Question
Accounting
- XYZ Company is interested in acquiring ABC Company, ABC Company has two million shares outstanding, and a target capital structure consisting of 50 percent debt and 50 percent equity. ABC Companys debt interest is 3 percent and the market return is 10 percent. Assume also that the tax rate applicable to ABC company is 40 percent. What should the ABC Companys current stock price be, assuming that its current free cash flow (FCF) is $2.5 million and is expected to grow at a rate of 5 percent per year and its beta is 1.5?
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!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.