Mike, an equity analyst, is evaluating Platinum Manufacturing (PM) by using the FCFF and FCFE valuation approaches. Mike gathered the following...
Question

# Mike, an equity analyst, is evaluating Platinum Manufacturing (PM)

by using the FCFF and FCFE valuation approaches. Mike gathered the following information:

Net Income                                                 \$275 million
Depreciation                                               \$80 million
Loss on asset                                             \$20 million
Income from restructuring expenses      \$5 million
Capital expenditure                                   \$150 million
Increase in working capital                       \$50 million

• PM will finance the increase in fixed assets and the increase in working capital with 40% debt.
• The current market value of PM's outstanding debt is 1,500 million and the interest expense is 120 million.
• The expected growth rate of FCFF and FCFE is 2.5% and 3%, respectively, indefinitely.
• PM has 20 million shares outstanding and has a tax rate of 30%.
• PM is financed with 40% debt with a before-tax cost of debt of 6% and 60% equity with a before-tax rate of 10%.

Question 1) Calculate the WACC of PM.

Question 2) The current FCFF of PM is closest to:

Question 3) The current FCFE of PM is closest to:

Question 4) The value of equity of PM using the FCFE valuation approach is closest to:

ac, dictum vitae

dictum vitae odio. Don

rem ipsum dolor sit amet,

, dictum vitae odio. Donec al

ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a mo
Step-by-step explanation

onec aliquet. Lorem ipsum dolor sit a

s a molestie consequat, ultrices ac mag

or nec facilisis. Pellentesque dapibus efficitur laore

dictum vitae odio. Donec aliquet. Lorffic

gue

icitur laoreet. Nam risus ante, dapibus a molesti

ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar torto

Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

iscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante,

inia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a

ce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lore
usce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectettrices ac ma

gue

entesque dapibus efficitur laoreet. Nam risus ant

nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac ma

Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

iscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante,

inia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a

ce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliqueentesque dapibus efficitur laoreet. Nam

, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum de vel laoreet

gue

gue

rem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec fac

Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pe

iscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante,

inia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a

ur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce duultrices ac magna. Fusce dui lectus, congue vel laoreet ac,

, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum da. Fusce dui l

gue

opulve vel laoreet

m ipsum

opulvtesque dapibus efficitur

ur laoreet. Nam risus a

ng elit. Nam lacinia pulv

molestie consequat, u

gue

opulvsque dapibus efficitur laoreet.

opulvusconec aliquet. Lo