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Hi, could you please help me solve this corporate finance question?
Hi, could you please help me solve this corporate finance question? Thanks!
Assume you are trying to find an estimate of PrintTronics Inc.'s share price using the flow to equity method. PrintTronics' current EBIT is $2 million. The firm's tax rate is 40% and the firm's current beta is 1.265. You estimate that the market risk premium is 6% and the current risk-free rate is 4%. The firm has $3,000,000 in perpetual debt outstanding with a cost of 8%, the firm has 250,000 shares outstanding, and you expect the firm's levered cash flow to grow at 3% forever.
A. What is the firm's levered cost of equity?
B. What is the value of the firm's equity?
C. What is your estimate of the firm's share price?