rane Sporting is a listed company in New York. Its current before-interest, after-tax operating cash flow is $200 million. The cash flows are expected to grow at 8% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available: Tax rate 30% Risk-free rate 5% Market return 15% Equity beta 2 Cost of debt 10% D/E 60% question Using the “free cash flow” methodology, the value of Crane Sporting is closest to: A. $1,531 million B. $1,072 million C. $717 million D. None of the above
rane Sporting is a listed company in New York. Its current before-interest, after-tax operating cash flow is $200 million. The cash flows are expected to grow at 8% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available: Tax rate 30% Risk-free rate 5% Market return 15% Equity beta 2 Cost of debt 10% D/E 60% question Using the “free cash flow” methodology, the value of Crane Sporting is closest to: A. $1,531 million B. $1,072 million C. $717 million D. None of the above
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 17P
Related questions
Question
Crane Sporting is a listed company in New York. Its current before-interest, after-tax operating cash flow is $200 million. The cash flows are expected to grow at 8% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available:
| Tax rate | 30% |
| Risk-free rate | 5% |
| Market return | 15% |
| Equity beta | 2 |
| Cost of debt | 10% |
| D/E | 60% |
question
Using the “
| A. |
$1,531 million |
|
| B. |
$1,072 million |
|
| C. |
$717 million |
|
| D. |
None of the above |
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