Coca-Cola Inc. (KO) has FCFF of $9.205 billion and FCFE of $7.554 billion. Coca-Cola’s WACC is 7.0 percent, and its required rate of return for equity is 8.5 percent. FCFF is expected to grow forever at 2.07 percent, and FCFE is expected to grow forever at 4.81 percent. Pfizer has debt outstanding of $52.867 billion. What is the total value of Coca-Cola’s equity using the FCFF valuation approach? B. What is the total value of Coca-Cola’s equity using the FCFE valuation approach

Coca-Cola Inc. (KO) has FCFF of $9.205 billion and FCFE of $7.554 billion. Coca-Cola’s WACC is 7.0 percent, and its required rate of return for equity is 8.5 percent. FCFF is expected to grow forever at 2.07 percent, and FCFE is expected to grow forever at 4.81 percent. Pfizer has debt outstanding of $52.867 billion. What is the total value of Coca-Cola’s equity using the FCFF valuation approach? B. What is the total value of Coca-Cola’s equity using the FCFE valuation approach

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 7P

See similar textbooks

Similar questions

Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%. The firms WACC is 12%, and it has 15 million shares of common stock outstanding. The firm has 30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other nonoperating assets. It has 368 million in debt and 60 million in preferred stock. a. What is the value of operations? b. Immediately prior to the repurchase, what is the intrinsic value of equity? c. Immediately prior to the repurchase, what is the intrinsic stock price? d. How many shares will be repurchased? How many shares will remain after the repurchase? e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?
Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Widgets Inc has an expected EBIT of $64,000 in perpetuity and a tax rate of 35 percent. The firm has$95,000 in outstanding debt at an interest rate of 8.5 percent, and its unlevered cost of capital is 15percent. What is the value of the firm according to M&M Proposition I with taxes? Should the companychange its debt–equity ratio if the goal is to maximize the value of the firm? Explain.
Houston Tools has expected earnings before interest and taxes of $189,400, an unlevered cost of capital of 12.87 percent, and a tax rate of 34 percent. The company has $318,000 of debt that carries a coupon rate of 6.2 percent. The debt is selling at par value. What is the value of this firm?
Time Warner shares have a market capitalization of $55 billion. The company just paid a dividend of $0.35 per share and each share trades for $35. The growth rate in dividends is expected to be 6.5% per year. Also, Time Warner has $20 billion of debt that trades with a yield to maturity of 7%. If the firm's tax rate is 30%, compute the WACC?
The Wei Corporation expects next year's net income to be $10 million. The firm is currently financed with 40% debt. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.
Houston Tools has expected earnings before interest and taxes of $236,800, an unlevered cost of capital of 12.65 percent, and a tax rate of 35 percent. The company has $420,000 of debt that carries a 7 percent coupon. The debt is selling at par value. What is the value of this firm?
Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $204,000 per year. The cost of equity is 14.5 percent and the tax rate is 39 percent. The firm can borrow perpetual debt at 5.6 percent. Currently, the firm is considering converting to a debt–equity ratio of 1.14. What is the firm's levered value?
Airport Motors, Inc. has $2,305,800 in current assets and $854,000 in current liabilities. The managers want to increase the firm’s inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below a 2.1, (assuming all other current assets and current liabilities remain constant)?
National Inc. has forecasted that its net income will be P520,000. The company has an debt-to-equity ratio of 25%. The dividend policy of the firm follows the residual dividend model. National Inc. has a project that needs funding amounting to P600,000. The number of issued and outstanding shares of National Inc. is 5,000. How much is the dividend per share?
A company has a current value of operations of $800 million,and it holds $100 million in short-term investments. If thecompany has $400 million in debt and has 10 million commonshares outstanding, what is the estimated price per share?($50.00
Airspot Motors, Inc. has $2,343,600 in current assets and $868,000 in current liabilities. The company's managers want to increase the firm's inventory, which will be financed using short-term debt. How much can the firm increase its inventory without its current ratio falling below 2.1 (assuming all other current assets and current liabilities remain constant)?