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Company’s financials: Market value of debt € 500,000 Cost of debt 7% Tax rate 20% Adjusted...

Company’s financials: Market value of debt € 500,000 Cost of debt 7% Tax rate 20% Adjusted beta 1.6 Risk-free rate of return 4% Equity risk premium 5% Optimal capital structure: Debt – 45%, equity – 55% Free cash flow (current year) € 82,000 Projected long-term growth rate in free cash flow 4% Number of shares outstanding 22,000 Assume that the free cash flow to the firm is expected to grow indefinitely. Using the DCF method,

estimate: 1. the value of the firm,

2. the value of equity and the intrinsic value of a share of stock.

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