You are an analyst and you are valuing company ‘X’. The projected FCF to the equity holder of the company for the next 5 consecutive years are: € 2 mln, € 3 mln, € 4.5 mln, € 4.9 mln and € 5 mln; and then € 4 mln is anticipated for rest of years. The cost of equity is 7%.

a) What is the equity value of the company?

b) The company has 2 mln shares outstanding. What is the price of each share?

c) The stock of is traded at € 26 per share. Is the share undervalued or overvalued and what is your recommendation?

Answer rating: 100% (QA)

The equity value of company is equal to the discounted value of the free cash flow to equity holders ... View the full answer