Estimate? amrs equity cost of capital

Assignment Help Financial Management

Reference no: EM131545895

Amarindo, Inc.? (AMR), is a newly public firm with 11.5 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its free cash flow in the coming year to be ?$15.46 ?million, and you expect the? firm's free cash flows to grow by 4.3?% per year in subsequent years. Because the firm has only been listed on the stock exchange for a short? time, you do not have an accurate assessment of? AMR's equity beta.? However, you do have beta data for? UAL, another firm in the same? industry:

Equity Beta Debt Beta Debt-Equity Ratio

UAL 1.65 0.33 1.1

AMR has a much lower? debt-equity ratio of 0.33?, which is expected to remain? stable, and its debt is risk free.? AMR's corporate tax rate is 32?%, the? risk-free rate is 5.2?%, and the expected return on the market portfolio is 11.5%.

a. Estimate? AMR's equity cost of capital.

b. Estimate? AMR's share price.

Reference no: EM131545895

Questions Cloud

Speaking to an audience of business people : Given that you are a newly hired government agent and you are speaking to an audience of business people, using economics terms, concepts, and or methods

Determines the economic rent for land : As a business consultant, how would you explain to your client what determines the economic rent for land?

Purchases that consumers actually make : Why is it so important to choose a market basket that reflects purchases that consumers actually make?

What is the company total book value of debt : What is the company's total book value of debt? What is the company's total market value of debt? What is your best estimate of the aftertax cost of debt?

Estimate? amrs equity cost of capital : Estimate? AMR's equity cost of capital. Estimate? AMR's share price.

Identify the companys mission statement : Identify the company's mission statement, vision statement, goals, objectives, and tactical plans.

Balanced budget amendment : What are some pros and cons to having a balanced budget amendment?

What is part proliferation and how to reduce it : What is part proliferation and how to reduce it?

Describe the characteristics of oligopoly : Describe the characteristics of Oligopoly. What are some industries that behave like oligopolists?

User Account

All Pages