Question: Demonstrate using the following example how both methodologies, FCFF and FCFE models, will lead to the same value of equity. Assume a firm with no-growth

Demonstrate using the following example how both methodologies, FCFF and FCFE models, will lead to the same value of equity.

Assume a firm with no-growth potential earns FCFF of $100m in perpetuity and is taxed at 40%. Also the firm is financed with $600m equity and $400m debt and that both are measured at true market values. The cost of equity capital is 13.87% and the cost of debt is 7%.

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