Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the equity of a hypothetical company, given the following information Current years reported free cash flow to equity $1,400,000 Current years normalized free cash flow to equity $1,800,000 Long term interest bearing debt $2,000,000 Weighted average cost of capital 15 percent Equity discount rate 18 percent Long term growth rate of FCFE 5 5 percent

Question: Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the equity of a hypothetical company, given the following

Using the capitalized cash flow method (CCM), calculate the fair market value of 100 percent of the equity of a hypothetical company, given the following information:

Current year’s reported free cash flow to equity = $1,400,000 Current year’s normalized free cash flow to equity = $1,800,000
Long-term interest-bearing debt = $2,000,000
Weighted average cost of capital = 15 percent
Equity discount rate = 18 percent
Long-term growth rate of FCFE = 5.5 percent

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