• The FCFF and FCFE of OLE Co. last year were $17 billion and $13 billion, respectively. OLE's WACC is 11 percent, and its required rate of return for equity is 13 percent. FCFF is expected to grow at 7 percent per year on average in the foreseeable future. For FCFE, the growth rate is expected to be 7.5 percent per year. The market value of OLE's outstanding debt stands at $200 billion.
  i) Compute the total value of OLE's equity using the FCFF valuation approach.
  II ) Compute the total value of OLE's equity using the FCFE valuation approach.

Answer rating: 100% (QA)

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