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adelina 88 [10]
3 years ago
15

6. Goog company has an EBIT*(1-tax) of $9,737, a depreciation of $1,851, change of NOW of $381, and a capital expenditure of $3,

438. The growth rate of free cash flow is expected to be 17.68% for next two years. The beta of the firm is 1.19, the target capital structure of the firm is 6% debt 94% equity, the cost of debt is 3%, the tax rate is 40%, the market risk premium is 8% and the risk free rate is 1%. Given a comparable Price to Ebitda ratio of 14.15 and a market value of debt of $4,200, what is firm’s equity value using DCF approach?
Business
1 answer:
lisov135 [29]3 years ago
4 0

Answer:

$20,772.12    

Explanation:

For computing the firm equity value using DCF analysis, first we need to do the following calculations which are shown below:

Required rate of return = Risk free rate of return + Beta × market risk premium

= 1% + 1.19 × 8%

= 10.52%

Now the WACC is

= Weight of equity × Cost of equity + Weight of debt × cost of equity × (1 - tax rate)

= 94% × 10.52% + 6% × 3% × (1 - 40%)

= 10%

Now the Free cash flow is

= Net income + depreciation expense - change in non working capital - change in capital expenditure

= $9,737 + $1,851 - $381 - $3,438

= $7,769

Now the enterprise value is

= $7,769 + {$7,769 + (1 + 17.68) ÷ (1 + 10%)} + (1 + 17.68)^2 ÷ (1 + 10%)^2

= $24,972.12

So the firm equity value is

= Equity - debt

= $24,972.12 - $4,200

= $20,772.12    

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Use the following comparative figures for Apple and Google. Google 12.662 $ Key Figures Net income (in millions) Cash dividends
azamat

Answer and Explanation :

Few information is missing in the question kindly find the attachment

As per the data given in the question,

The formula and the computation is shown below

1) Book value per share = Equity applicable to share ÷ share outstanding

                                             Apple Google

Equity  common share a $134,047 $152,502

Common share outstanding b 5,126.201 694.783

Book value per common share a ÷ b $26.15 $219.50

2)Basic EPS = Net income ÷ weighted Avg common share outstanding

                Apple Google

Net income a $48,351 $12,662

weighted Avg common share outstanding b 5217.242 693.049

Basic EPS a ÷ b $9.27 $18.27

3)Dividend yield = Cash dividend per common share ÷ Market price per share

                                              Apple Google

Cash dividend per common share a 2.4 0

Market price per share b $154.12 $1046.4

Dividend yield a ÷ b 1.56% 0.00%

4) Price earning ratio = Market price per share ÷ Basic EPS

                                  Apple Google

Market price per share a $154.12 $1046.4

Basic EPS b 9.26754 18.26999

Price earning ratio a ÷ b 16.63 57.27

5) A higher PE ration indicates that investors want to pay a higher share price because of growth expectation in near by future

Therefore Google has higher PE ratio

Hence, investors have greater expectation of performance of Google in future.

4 0
3 years ago
g McGuire was an employee of First National Bank of Grayson (FNBG). FNBG participated in a Kentucky Housing Corporation (KHC) pr
Crazy boy [7]

Answer:

The court concluded truthfully, as he had done all the analysis and acknowledged the documentation and investment purposes.

The program scammed funds which might have been used for small-income housing by the government agency.

<em>United States v. McGuire, 744 F.2d 1197 (Cir. 11, 1984).</em>

6 0
3 years ago
Elliston company accepted credit card payments for $10,000 of services provided to customers. the credit card company charges a
Nastasia [14]

To solve this question, take 3% of $10,000 to see what the increase would be:

$10,000 x 3% = $300

There is an increase of $300 due to the 3% credit card processing fee that the credit card company is imposing on Elliston.

8 0
3 years ago
You will receive $4,000 at graduation 3 years from now. You plan on investing this money at 5 percent annual interest until you
attashe74 [19]

Answer:

It will take approximately 55 years

Explanation:

<em>The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years</em>

FV = PV × (1+r)^(n)

FV= 50,000, PV = 4,000, n-?, r- 5%

50,000 = 4,000 × (1.05)^n

divide both sides by 4000

12.5 = 1.05^n

n= log 12.5/log 1.05

n = 51.8

The number of years = 51.8 + 3 years

                                  =54.767

Approximately 55 years

It will take 55 years

8 0
2 years ago
Sally values creativity. which of these careers is most likely the best for her
Lina20 [59]
If sally is creative then being a poet would make the most sense 
7 0
3 years ago
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