Estimate the value of the firm now

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Company C reported net income of $770 million after interest expenses of $320 million in a recent financial year. (The corporate tax rate BEING 36 percent.) It reported depreciation of $960 million in that year, and capital spending was $1.2 billion. The firm also had $4 billion in debt outstanding on the books, was rated AA (carrying a yield to maturity of 8 percent), and was trading at par (up from $3.8 billion at the end of the previous year). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at $60 per share), with a book value of $5 billion. Company C paid 40 percent of its earnings as dividends and working capital requirements are negligible. (The Treasury bond rate is 7 percent.) the market risk premium is 5.5% a. Estimate the value of the firm now. b. Estimate the value of equity and the value per share now.

Reference no: EM131907956

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