Equity using the fcff valuation approach

Assignment Help Financial Management
Reference no: EM131535147

ABC Company has FCFF of $ 1.7 billion and FCFE of $ 1.3 billion. WACC is 11 percent, and its required rate of return on equity is 13 percent. FCFF is expected to grow forever at 7 percent, and FCFE is expected to grow forever at 7.5 percent. ABC Company has debt outstanding of $ 15 billion.

a) What is the total value of ABC’s equity using the FCFF valuation approach?

b) What is the total value of ABC’s equity using the FCFE valuation approach?

Reference no: EM131535147

Questions Cloud

Project that has the cash flow and wacc data : Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV?
Compute the effective yield in us dollar terms : compute the effective yield in US dollar terms.
Capital intensity ratio at the current level of sales : What is the Capital Intensity Ratio at the current level of Sales?
States the product advantages and benefits : Identifies a specific problem, States the product’s advantages and benefits,
Equity using the fcff valuation approach : What is the total value of ABC’s equity using the FCFF valuation approach?
Combined incremental state and federal income tax rate : What is the total state and federal income tax it must pay? Compute its combined incremental state and federal income tax rate.
What is the yield-to-maturity on these bonds : Theo has been assigned the task of determining the cost of capital for his division of the Firm. What is the yield-to-maturity on these bonds?
What is the firm weighted average cost of capital : What is the firm's weighted average cost of capital if the tax rate is 35%?
What other institutions are available to facilitate trade : What is the role of banking institutions in international trade besides financing? What other institutions are available to facilitate trade?

Reviews

Write a Review

Financial Management Questions & Answers

  Compute the mean median and variance biological

A biological psychologist records the number of cells in a particular brain region of cats that respond to a tactile stimulus. - Compute the Mean, Median, Mode, Range, Standard deviation, and Variance biological.

  Based on the expected activity of copies

Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies: The costs are assigned to two ..

  Stock valuation with non-constant growth

Stock valuation with non-constant growth: M&M Co. just paid a dividend of $5.00 per share. The company will increase its dividend by 15 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches t..

  What can be done to get competitive advantage

What can be done to get a competitive advantage?

  Option pricing model to price the call option

The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk free rate of return is 3.5%. The instantaneous standard deviation of its stock is 35%. Using the Black-Scholes Option P..

  What is the effective annual rate of interest

The disposable income from your part-time job in 2012 and 2013 is $16,500. In 2012, you borrowed $900 at 18 percent interest. You repay your loan with interest in 2013. What is the effective annual rate of interest?

  Banks typically pay interest on an annual basis

Banks typically pay interest on an annual basis. Banks typically pay interest on a daily basis. Bond holders are usually paid on a semi-annual basis

  Contrast mature profitable firms with stable cash flows

Compare and contrast mature profitable firms with stable cash flows with firms with higher risk (dependencies on economy) with unstable cash flows. What risks do they take in regards to leverage use, tax shields and trading information between manage..

  How the npv new and change in npv is calculated

We are evaluating a project that costs $644,000, has an eight-year life, and has no salvage value. Assume that the depreciation is straight-line to zero over the life of the project. Sales are projected at $70,000 units per year. how the NPV new and ..

  Forecast brous sards additional funds needed for coming year

The after-tax profit margin is forecasted to be 3%, and the forecasted payout ratio is 60%. Use the AFN equation to forecast Brous-sard's additional funds needed for the coming year.

  Do you think sampsons should purchase disability insurance

Make suggestions to the Sampsons regarding their health insurance. Do you think they should switch from the HMO to a PPO? Why or why not?

  Degree of operating leverage for the level of production

The Poseidon Swim company produces swim trunks. The average selling price for one of their swim trunks is $39. The variable cost per unit is $20. Poseidon swim has average fixed costs per year of $57,122. Determine the degree of operating leverage fo..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd