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Basic Question 1 of 4
After evaluating Dell Software's financial statements, you conclude that the company has FCFF of $2.8 million. You expect its FCFF to grow forever at 8%. Additional information:
- DS's WACC: 12%.
- Required rate of return on its equity: 15%.
- Outstanding debt: $25 million.
The total value of DS' equity is ______.
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | WACC is for FCFF, required rate of return is for dividend. |
| ssradja | don't forget to calculate next period FCFF |
| Lavay | Required return is also for FCFE. |
| Manasseh | Required rate of return is not needed to answer this question |
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Learning Outcome Statements
explain fundamental determinants of residual income;
explain the relation between residual income valuation and the justified price-to-book ratio based on forecasted fundamentals;
calculate and interpret the intrinsic value of a common stock using single-stage (constant-growth) and multistage residual income models;
CFA® 2025 Level II Curriculum, Volume 4, Module 24.