a. Following information is about Steady plc, a company in steady state. Operating income £500m Tax rate 25% Dividend Payout ratio 70% Capital expenditure £500m Depreciation £200m Net Operating Working Capital £250m Book value of Debt £600m Number of shares outstanding 100m Beta 1.05 Steady state growth rate 1% Risk-free rate 2% Equity risk premium 6% Pre-tax cost of debt 4% Current price per share £10 Required: i. Estimate the equity value per share using the Free Cash Flow to Firm model. Use the current share price for calculating the WACC.
a. Following information is about Steady plc, a company in steady state. Operating income £500m Tax rate 25% Dividend Payout ratio 70% Capital expenditure £500m Depreciation £200m Net Operating Working Capital £250m Book value of Debt £600m Number of shares outstanding 100m Beta 1.05 Steady state growth rate 1% Risk-free rate 2% Equity risk premium 6% Pre-tax cost of debt 4% Current price per share £10 Required: i. Estimate the equity value per share using the Free Cash Flow to Firm model. Use the current share price for calculating the WACC.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter26: Mergers And Corporate Control
Section: Chapter Questions
Problem 1P: Hasting Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares...
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1. a. Following information is about Steady plc, a company in steady state.
Operating income £500m
Tax rate 25%
Dividend Payout ratio 70%
Capital expenditure £500m
Net Operating Working Capital £250m
Book value of Debt £600m
Number of shares outstanding 100m
Beta 1.05
Steady state growth rate 1%
Risk-free rate 2%
Equity risk premium 6%
Pre-tax cost of debt 4%
Current price per share £10
Required:
i. Estimate the equity value per share using the
model. Use the current share price for calculating the WACC.
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