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    Computing the Value of Operations and Equity

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    Name______________________________________

    FINC 5880
    Session 9
    Shares outstanding 10,000,000 FCF0 5,000,000
    Target debt in capital structure 30% Constant growth rate 6%
    Debt interest rate 8% Beta 1.2
    rRF 3% Amount of debt 5,000,000
    Market risk premium 7%
    Tax rate 30%

    a. Calculate the required rate of return on equity using equation: rs= rRF + RPM(b)

    b. Calculate weighted average cost of capital, using equation: WACC = Wdrd(1-%) + wsrs

    c. Calculate the value of operations, using equation: Vops = FCF0(1+g)/WACC - g)

    d. Calculate the value of the company's equity, using equation: Vs = Vops - debt

    e. Calculate the current value of the company's stock.

    © BrainMass Inc. brainmass.com September 27, 2022, 10:55 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/computing-value-operations-equity-615716

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    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com September 27, 2022, 10:55 am ad1c9bdddf>
    https://brainmass.com/business/beta-and-required-return-of-a-project/computing-value-operations-equity-615716

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