You have been tasked with using the FCF model to value Amara's Jewelry Company. After your initial review, you find that Amara's has a reported equity beta of 1.6, a debt-to-equity ratio of 0.5, and a tax rate of 21 percent. In addition, market conditions suggest a risk- free rate of 5 percent and a market risk premium of 10 percent. If Amara's had FCF last year of $49.5 million and has current debt outstanding of $124 million, find the value of Amara's equity assuming a 3.0 percent growth rate in FCF. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Value of the equity

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You have been tasked with using the FCF model to value Amara's Jewelry Company. After your initial review, you find that Amara's has
a reported equity beta of 1.6, a debt-to-equity ratio of 0.5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-
free rate of 5 percent and a market risk premium of 10 percent. If Amara's had FCF last year of $49.5 million and has current debt
outstanding of $124 million, find the value of Amara's equity assuming a 3.0 percent growth rate in FCF.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
Value of the equity
Transcribed Image Text:You have been tasked with using the FCF model to value Amara's Jewelry Company. After your initial review, you find that Amara's has a reported equity beta of 1.6, a debt-to-equity ratio of 0.5, and a tax rate of 21 percent. In addition, market conditions suggest a risk- free rate of 5 percent and a market risk premium of 10 percent. If Amara's had FCF last year of $49.5 million and has current debt outstanding of $124 million, find the value of Amara's equity assuming a 3.0 percent growth rate in FCF. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Value of the equity
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