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Estimate the market value of the firm

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Question - National bank is an all-equity firm with an after-tax operating income of $350 million per annum; it has 200 million outstanding shares. The firm needs $180 million to meet its annual reinvestment target. The firm expects after-tax operating income to grow at the rate of 5% per annum indefinitely and the cost of capital to remain at its current rate of 12% in the foreseeable future.

Required - Estimate the market value of the firm and total value per share accruing to existing shareholder, assuming that the company pays all of its free cash flows as dividend.

Reference no: EM133063421

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