1 a company is financed with 60 equity and 40 debt the cost, Ask an Expert

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1. A company is financed with 60% equity and 40% debt. The cost of equity of 12.5% and the cost of debt is 8.5%. The tax rate is 35%. What is the firm’s WACC?

2. The risk free rate is 4.5%, the expected return on the market is 9.75%, and the firm’s beta is 1.25. Calculate the required rate of return.

3. What is the trade-off in selecting the initial forecast period?

4. Explain why the discounted cash flow analysis (DCFA) approach to value the operating firm is considered the “gold standard” of valuation.

5. A firm has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2, and 750,000 for Year 3. The projected terminal value at the end of Year 3 is $8,000,000. The firm’s WACC is 12.5%. What is the DCF value of the firm?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92858008

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