You have been tasked with using the FCF model to value Amara's Jewelry Company. After your Initial review. you find that Amara's has a reported equity beta of 1.7, a debt-to-equity ratio of 0.5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-free rate of 6 percent and a market risk premium of 8 percent. If Amara's had FCF last year of $51.5 million and has current debt outstanding of $128 million, find the value of Amara's equity assuming a 3.7 percent growth rate In FCF. Note: Do not round Intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Value of the equity $ 4.74

You have been tasked with using the FCF model to value Amara's Jewelry Company. After your Initial review. you find that Amara's has a reported equity beta of 1.7, a debt-to-equity ratio of 0.5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-free rate of 6 percent and a market risk premium of 8 percent. If Amara's had FCF last year of $51.5 million and has current debt outstanding of $128 million, find the value of Amara's equity assuming a 3.7 percent growth rate In FCF. Note: Do not round Intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Value of the equity $ 4.74

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 21P

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You have been tasked with using the FCF model to value Julie’s Jewelry Co. After your initial review, you find that Julie’s has a reported equity beta of 1.6, a debt-to-equity ratio of .5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-free rate of 5 percent and a market risk premium of 9 percent. If Julie’s had FCF last year of $49.0 million and has current debt outstanding of $123 million, find the value of Julie’s equity assuming a 4.8 percent growth rate in FCF. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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LOFTA Corporation is interested in measuring the cost of each specific type of capital as well as the weighted average cost of capital. Historically, the firm has raised capital in the following manner: The tax rate of the firm is currently 30%. The needed financial information and data are as follows: Debt LOFTA can raise debt by selling $1,000-par-value, 6.5% coupon interest rate, 10-year bonds on which annual interest payments will be made. To sell the issue, an average discount of $20 per bond needs to be given. There is an associated flotation cost of 2% of par value. Preferred stock Preferred stock can be sold under the following terms: The security has a par value of $100 per share, the annual dividend rate is 6% of the par value, and the flotation cost is expected to be $4 per share. The preferred stock is expected to sell for $102 before cost considerations. Common stock The current price of Nova’s common stock is $35 per share. The cash dividend is expected to be…