Question

ABC Ltd most recent FCFF is $5,000,000. ABC's target debt-to-equity ratio
is 0.25. The matkct value of the firm's debt is $10,000,000, and ABC has
2,000,000 shares of common stock outstanding. The firm's tax rate is 40%,
the shareholders require a return of 16% on their investment, the firm's
before-tax
cost of debt is 8%, and the expected long-term growth rate in FCFF is 5%.
Calculate the value of the firm and the value per share of the equity.
Hint: The target debt-to-equity ratio is 0.25. This implies that for every $1 of
debt, there is $4 of equity, for total capital of $5. Calculate weight of debt
and equity and Calculate WACC for discounting
Use concept of Gordon growth model for FCFF
O $22.97
O $24.97
$26.97
O $25.87​

Answer 1

Answer:

i think the answer of this question is c