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You have been asked to value Alcoa and have come up with the following inputs.

The stock has a beta of 0.90, estimated over the last five years. During this period, the firm had an average debt/equity ratio of 20 percent and an average cash balance of 15 percent.
The firm's current market value of equity is 1.6 billion and its current market value of debt is $800 million. The current cash balance is $500 million.
The firm earned earnings before interest and taxes of $450 million, which includes the interest income on the current cash balance of $50 million. The firm's tax rate is 40 percent.
The firm is in stable growth, and its earnings from operations are expected to grow 5 percent a year. The net capital expenditures next year are expected to be $90 million.

Estimate the value of the noncash assets of the firm, its total value, and the value of its equity.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91631258

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