# 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.

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## SOLUTION This solution is **FREE** courtesy of BrainMass!

Please see the attached Excel worksheet.

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