3. (17 points) You are doing a corporate valuation of Mistletoe Corporation and have the following...

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3. (17 points) You are doing a corporate valuation of Mistletoe Corporation and have the following information on the company: Number of shares of common stock outstanding (million): 10.0 Current common stock price (Po): $42.00 Equity required return (res): 18.0% Number of shares of preferred stock outstanding (million): 5.0 Current preferred stock price (Pp): $60.00 Preferred stock required return (rp): 16.0% Total market value of debt ($ million): $480.00 Before tax cost of debt (ra): 11.9% Tax rate: 30% You have also projected the following free cash flows for Mistletoe: Year Free Cash Flow ($mil) -60.0 1 50.0 2 120.0 3 200.0 4 After year 4, you expect free cash flows to grow at a constant rate of 4.0% per year. a. What is Mistletoe's weighted average cost of capital? ANS b. What is the Mistletoe's total corporate value? ANS 3. (17 points) You are doing a corporate valuation of Mistletoe Corporation and have the following information on the company: Number of shares of common stock outstanding (million): 10.0 Current common stock price (Po): $42.00 Equity required return (res): 18.0% Number of shares of preferred stock outstanding (million): 5.0 Current preferred stock price (Pp): $60.00 Preferred stock required return (rp): 16.0% Total market value of debt ($ million): $480.00 Before tax cost of debt (ra): 11.9% Tax rate: 30% You have also projected the following free cash flows for Mistletoe: Year Free Cash Flow ($mil) -60.0 1 50.0 2 120.0 3 200.0 4 After year 4, you expect free cash flows to grow at a constant rate of 4.0% per year. a. What is Mistletoe's weighted average cost of capital? ANS b. What is the Mistletoe's total corporate value? ANS