Question: GIVEN WACC Beta = 1.05 Market Return = 10.50% Risk Free Rate = 1% Weight of Debt = 15% Weight of Equity = 85% After-Tax
| GIVEN | ||
| WACC |
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| Beta = | 1.05 |
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| Market Return = | 10.50% |
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| Risk Free Rate = | 1% |
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| Weight of Debt = | 15% |
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| Weight of Equity = | 85% |
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| After-Tax Cost of Debt = | 3% |
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| DDM | Dividend/Share in Year One = D(1) = | $2.20/share |
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| Terminal Gr = | 3% |
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| Interim Gr = | 5% |
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| Blended Weight | 20% |
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| DCF | Free Cash Flow in year One = FCF(1) = | $3,000 |
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| Terminal Gr = | 3% |
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| Interim Gr = | 7% |
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| Total Debt = | $12,000 |
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| Cash & Cash Eq. = | $4,000 |
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| Shares Outstanding = | 1200 |
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| Blended Weight | 60% |
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| P/E | Next Year EPS = | $0.74/share |
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| Current P/E = | 42 |
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| Blended Weight | 20% |
A. What is LITs Weighted Average Cost of Capital (WACC)? _______
B. What is LITs current target price using the dividend discount model (DDM)? _______
C. What is LITs current target price using the discounted cash flow model (DCF)? _______
D. What is LITs current target price using price-to-earnings multiple (P/E)? _______
E. What is LITs blended current target price? _______
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