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You are valuing a company at year end 2022 that has a target capital structure of 30% equity and 70% debt. The estimated cost of equity is 16% and the net cost of debt is 8%, respectively. The estimated stream of free cash flow to the firm (FCF) is: Values is £ 2023 2024 2026 FCF 2022 10 000 11 230 12 560 2025 13 240 14 350 The expected nominal growth rate of FCF in perpetuity is 2.05%. At year end 2022 the estimated level of interest-bearing debt, cash, minorities, and financial investments are £10000, £9000, £4000, and £6000, respectively. The current market capitalization of the company is £ 160000. Your investment recommendation is:

You are valuing a company at year end 2022 that has a target capital structure of 30% equity and 70% debt. The estimated cost of equity is 16% and the net cost of debt is 8%, respectively. The estimated stream of free cash flow to the firm (FCF) is: Values is £ 2023 2024 2026 FCF 2022 10 000 11 230 12 560 2025 13 240 14 350 The expected nominal growth rate of FCF in perpetuity is 2.05%. At year end 2022 the estimated level of interest-bearing debt, cash, minorities, and financial investments are £10000, £9000, £4000, and £6000, respectively. The current market capitalization of the company is £ 160000. Your investment recommendation is:

Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 26SP
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You are valuing a company at year end 2022 that has a target capital structure of 30% equity and 70% debt. The estimated cost of equity is 16% and the net cost of debt is 8%, respectively. The estimated stream of free cash flow to the firm (FCF) is: Values is £ 2023 2024 O a. O b. FCF O c. 2022 10 000 11 230 12 560 The expected nominal growth rate of FCF in perpetuity is 2.05%. At year end 2022 the estimated level of interest-bearing debt, cash, minorities, and financial investments are £10000, £9000, £4000, and £6000, respectively. The current market capitalization of the company is £ 160000. Your investment recommendation is: Buy, as the estimated year end 2022 equity value is £183417 Sell, as the estimated year end 2022 equity value is £153293 2025 Sell, as the estimated year end 2022 equity value is £159037 13 240 2026 14 350
Transcribed Image Text:You are valuing a company at year end 2022 that has a target capital structure of 30% equity and 70% debt. The estimated cost of equity is 16% and the net cost of debt is 8%, respectively. The estimated stream of free cash flow to the firm (FCF) is: Values is £ 2023 2024 O a. O b. FCF O c. 2022 10 000 11 230 12 560 The expected nominal growth rate of FCF in perpetuity is 2.05%. At year end 2022 the estimated level of interest-bearing debt, cash, minorities, and financial investments are £10000, £9000, £4000, and £6000, respectively. The current market capitalization of the company is £ 160000. Your investment recommendation is: Buy, as the estimated year end 2022 equity value is £183417 Sell, as the estimated year end 2022 equity value is £153293 2025 Sell, as the estimated year end 2022 equity value is £159037 13 240 2026 14 350
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