finance
Use the data below to estimate the weighted average cost of capital (WACC). You will estimate the cost of equity as an average of the cost equity results obtained from the CAPM approach and from the DCF approach as discussed in class.
P0 = 150, rRF = 3%, g = 2%, D0 = $13, t = 35%, ws = 60%, wd = 40%, rd = 7%, rM = 9%, b = 1.45 considering that P0 is the cutrent price of the stock, rRF is the risk free, g is the dividend growth rate, D0 is the last dividend paid, t is the corporate tax rate on income, ws is the ratio of equity to the total capital structure, wd is the weight of debt in the capital structure, rd is the nominal rate of debt, rM the return on the S&P500, and b is the stock beta.
2) Use the result from above question and the value from the table below to compute the following:
1. The Intrinsic Value of the Firm (Present value of the cash flows) (Use WACC as the discount rate)
2. The Value of equity assuming that the value of debt is $6,049.93
3. The price per share if the company has 150 shares outstanding
4. Compare the price per share you from your result to P0 of question 14. Is the stock currently overvalued or undervalued assuming your work in question 15 is accurate?
Years
1
2
3
4
5
FCF
1,500
2,500
-500
1,500
2,000
Terminal Value
30,994
Total
1,500
2,500
-500
1,500
32,994
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.