Do Pham is evaluating Phaneuf Accelerateur by using the FCFF and FCFE valuationapproaches. Pham has collected the following information (currency in euros):Phaneuf has net income of €250 million, depreciation of €90 million, capital expendi-tures of €170 million, and an increase in working capital of €40 million.Phaneuf will finance 40 percent of the increase in net fixed assets (capital expendituresless depreciation) and 40 percent of the increase in working capital with debt financing.Interest expenses are €150 million. The current market value of Phaneuf's outstandingdebt is €1,800 million.FCFF is expected to grow at 6.0 percent indefinitely, and FCFE is expected to grow at7.0 percent.• The tax rate is 30 percent.Phaneuf is financed with 40 percent debt and 60 percent equity. The before-tax cost ofdebt is 9 percent, and the before-tax cost of equity is 13 percent.Phaneuf has 10 million outstanding shares.A. Using the FCFF valuation approach, estimate the total value of the firm, the totalmarket value of equity, and the per-share value of equity.B. Using the FCFE valuation approach, estimate the total market value of equity and theper-share value of equity.

Given information, (in millions) Net income (NI) =250 Depreciation (NCC) =90 Capital expenditures…

Answered: Do Pham is evaluating Phaneuf…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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