Question: Question Completion Status You are trying to value a private company. The company has 5 million of debt and 4 million of book equity. The
Question Completion Status You are trying to value a private company. The company has 5 million of debt and 4 million of book equity. The ratio of market value to book vakue for simidar firms is 2. You decide to use this ratio to estimate the market value of equity as the input for the weights in WACC calculation. The average beta for publicly traded firms in the same industry is 2 and the average debt to quity ratio for pubic f ms in this industry s 4 The co rate tax rate is 40% The nskhee rate is 6% and tho mane risk premium is 55% The interest rate for debt is 10%. Here is the FCFF model for valuing the business Year EBIT (EBIT grows at 15% for the first $2.30 $2.65 S3.04 S3.50 S4.02 S422 five years and 5% thereafter) EBIT (1-Tax Rate) Less (Cap. Expenditures Depreciation) grows 51.38 $1.59 $1.82 $2.10 $2.41 $2.53 $.115 S.132 152 S 175 S 201 $0 00 at same 15% annual rate as revenue for 5 years and are offsetting thereafter) Equals FCF Assuming after 5 years, the growth rate is 5% forever 1. What is the unlevered Beta for publicly traded firms in the same industry
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