Home / Questions / Assume youve forecasted and calculated the following Free Cash Flows to Equity Holders Year FCFE
Assume you’ve forecasted and calculated the following Free Cash Flows to Equity Holders.
Year |
FCFE |
1 |
$1989.13 |
2 |
$2022.29 |
3 |
$2313.89 |
You have also made the assumption that after year 4, the cash flows to equity holders will grow at a constant rate of 5% per year indefinitely. The company recently paid an annual dividend of $6.89 and has a current share price of $122. The company also expects that dividends will grow at a constant rate of 3.13% per year indefinitely. Given this information, what is the value of this firm’s equity?
2)Assume you’ve forecasted and calculated the following Free Cash Flows to the Firm.
Year
FCFF
1 : $7,389
2: $8,993
3: $9,744
You have also made the assumption that after year 3, the company will grow by a rate of 2.8%.
Further suppose that the company has a current share price of $88.99 and a total of 4.5 million shares outstanding. The company currently has debt with a total face value of $891 million. These outstanding bonds are currently priced to yield 8.9% while quoting at 97% of total face value. The current t-bill rate is 1.1% and the market risk premium is 5.3%. We’ve estimated the ß to be 1.84. The marginal tax rate is 21%. Given this information, what is the value of this firm?
3)The following is a five year forecast for TruthHurts Incorporated.
Free Cash Flow (in millions)
2020: -14
2021: 5
2022: 29
2023: 47
2024: 69
After 2024, earnings before interest and tax will remain constant at $99 million, depreciation will equal capital expenditures each year, and working capital will increase by $5 million. Truth Hurt's WACC is 17.9% and its tax rate is 21%.
Estimate the market value of TruthHurts at the end of 2019.
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