Power Africa Consulting is evaluating Sasol using the FCFE valuation method. Power Africa has learned that Sasol has FCFE of 139 million. It is projected that the increase in net debt for Sasol will be 84 million. Interest expenses are currently R150 million, whilst the current market value of Sasol’s debt is R1800 million. In terms of growth, the FCFE is expected to grow at a 20% rate for the next 2 years. Over the subsequent 3 years thereafter its growth should decline linearly, ultimately reaching a stable growth rate of 5%. The before-tax cost of debt is 9%, and the before-tax cost of equity is 13%. The tax rate is 30% and Sasol has 10 million outstanding shares. Use the information given to calculate how much it will cost you to purchase a single Sasol share. 332.33 285.59 253.20 256.86 265.86
Power Africa Consulting is evaluating Sasol using the FCFE valuation method. Power Africa has learned that Sasol has FCFE of 139 million. It is projected that the increase in net debt for Sasol will be 84 million. Interest expenses are currently R150 million, whilst the current market value of Sasol’s debt is R1800 million. In terms of growth, the FCFE is expected to grow at a 20% rate for the next 2 years. Over the subsequent 3 years thereafter its growth should decline linearly, ultimately reaching a stable growth rate of 5%. The before-tax cost of debt is 9%, and the before-tax cost of equity is 13%. The tax rate is 30% and Sasol has 10 million outstanding shares. Use the information given to calculate how much it will cost you to purchase a single Sasol share. 332.33 285.59 253.20 256.86 265.86
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 8P
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Question
Power Africa Consulting is evaluating Sasol using the FCFE valuation method. Power Africa has learned that Sasol has FCFE of 139 million. It is projected that the increase in net debt for Sasol will be 84 million. Interest expenses are currently R150 million, whilst the current market value of Sasol’s debt is R1800 million. In terms of growth, the FCFE is expected to grow at a 20% rate for the next 2 years. Over the subsequent 3 years thereafter its growth should decline linearly, ultimately reaching a stable growth rate of 5%. The before-tax cost of debt is 9%, and the before-tax cost of equity is 13%. The tax rate is 30% and Sasol has 10 million outstanding shares. Use the information given to calculate how much it will cost you to purchase a single Sasol share.
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332.33
|
||
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285.59
|
||
|
253.20
|
||
|
256.86
|
||
|
265.86
|
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