The analyst is analyzing the financial statements of another Yettobe corporation (the state- ments are in million
Question:
The analyst is analyzing the financial statements of another Yettobe corporation (the state- ments are in million dollars). Its stock is currently traded at $50 and it has 20 million shares outstanding. The firm?s market value of debt is 120 millions. The shareholders require a return of 15% and before-tax cost of debt is 10%. Assume that the expected long-term growth rates in FCFF, FCFE, dividends, and residual income are 4%. Using the constant growth model to compute the following:
a. ?What is firm value?
b. ?What is the intrinsic equity value per share using FCFF?
c. ?What is the intrinsic equity value per share using FCFE?
d. ?What is the intrinsic equity value per share using DDM?
e. What is the intrinsic equity value per share using residual income model?
f. ?Based on our valuations, should the analyst give a buy/hold/sell recommendation for Yettobe stock?
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain