Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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11. More on the corporate valuation model
Praxis Corp. is expected to generate a free cash flow (FCF) of $2,285.00 million this year (FCF₁ = $2,285.00 million), and the FCF is expected to grow at a rate of 23.80% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 3.54% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Praxis Corp.’s weighted average cost of capital (WACC) is 10.62%, what is the current total firm value of Praxis Corp.? (Note: Round all intermediate calculations to two decimal places.)
a. $58,180.09 million
b. $6,964.55 million
c. $53,760.19 million
d. $44,800.16 million
Praxis Corp.’s debt has a market value of $33,600 million, and Praxis Corp. has no preferred stock . If Praxis Corp. has 150 million shares of common stock outstanding, what is Praxis Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.)
a. $82.13
b. $74.67
c. $73.67
d. $224.00
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