What is the firm market capitalisation of equity

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Reference no: EM132697997

An analyst forecasts a firm's nominal Equity Free Cash Flows to be:$10 million next year (t=1);

$20 million the year after (t=2);

$30 million in 3 years (t=3); and

From year 3 onwards, the nominal EFCF is expected to grow at the country's nominal GDP growth rate forever.

The perpetuity formula can be used to find the terminal value of this stock.

The nominal required return on equity is 6% pa.

The analyst forecasts GDP growth to be 1% pa in real terms or 'constant prices' from year 3 onwards.

Inflation is expected to be 1.5% pa from year 3 onwards. All rates are effective annual rates.

What is the firm's market capitalisation of equity?

Select one:

a. $860.8321 million

b. $829.0469 million

c. $793.3714 million

d. $750.0052 million

e. $438.469 million

 

Reference no: EM132697997

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