Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.1% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.2% 4 a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $287 million, and 43 million shares outstanding, estimate its share price.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
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