| equityValueConstantG {stockAnalyst} | R Documentation |
Calculates the amount of estimated total equity value by deducting the given Market Value of Debt from Value of firm based on single stage constant growth of FCFF.
Description
Amount of estimated total equity value is obtained by deducting the given Market Value of Debt from Value of firm based on single stage constant growth of FCFF. Consider that FCFF grows at a constant rate, g, such that FCFF in any period is equal to FCFF in the previous period multiplied by (1 + g). This means that this method is based on single stage constant growth model. So, FCFFt = FCFF(t–1) times (1 + g). If FCFF grows at a constant rate, firm value(FCFF1) is FCFF0 times (1+g) divided by (WACC-g).
Usage
equityValueConstantG(FCFF0, g, WACC, debtVal)
Arguments
FCFF0 |
A number. |
g |
A number. |
WACC |
A number. |
debtVal |
A number. |
Details
According to information provided by Jerald E. Pinto (2020), the method equityValueConstantG is developed to compute estimated value of the firm if FCFF is growing at a constant rate for the values passed to its three arguments. Here, FCFF0 is given amount of future Free Cash Flow to the Firm in millions of dollars, g is constant rate of growth under single stage constant growth model, and WACC is Weighted Average Cost of Capital.
Value
Input values to tfour arguments FCFF0 g, and WACC .
Author(s)
MaheshP Kumar, maheshparamjitkumar@gmail.com
References
Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194
Examples
equityValueConstantG(FCFF0=1.8,g=0.08,WACC=0.12,debtVal= 18 )
equityValueConstantG(FCFF0=700,g=0.05,WACC=0.102,debtVal=2200)