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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 |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
compare the free cash flow to the firm (FCFF) and free cash flow to equity (FCFE) approaches to valuation;
explain the ownership perspective implicit in the FCFE approach;
CFA® 2025 Level II Curriculum, Volume 4, Module 22.