| shareValueGivenDebtMV {stockAnalyst} | R Documentation |
Calculates the share value from Equity Value obtained by deducting the given Market Value of Debt from Discounted Value of FCFF and then dividing the output by number of outstanding shares.
Description
FCFF is the cash flow available to all suppliers of capital, using WACC to discount FCFF gives the total value of all of the firm’s capital. The value of equity is the value of the firm minus the market value of its debt. Dividing the total value of equity by the number of outstanding shares gives the value per share (Jerald E. Pinto, 2020).
Usage
shareValueGivenDebtMV(FCFF, t, WACC, debtMV, shares)
Arguments
FCFF |
A vector. |
t |
A vector. |
WACC |
A number. |
debtMV |
A number |
shares |
A number. |
Details
According to information provided by Jerald E. Pinto (2020), the method shareValueGivenDebtMV is developed to compute the share value from equity value obtained by deducting the given Market Value of Debt from Discounted Value of FCFF and then dividing the output by number of outstanding shares, for the values passed to its five arguments. Here, FCFF is given amount of future Free Cash Flow to the Firm (FCFF) in millions of dollars. For example, a value of 0.04 means 0.4 millions or 400,000 dollars, t is a vector of number of years ranging from 1 to any specified number of years for which FCFF is to be discounted, WACC is Weighted Average Cost of Capital, debtMV is Market Value of the debt, and shares is number of shares. Value of shares at 0.5 represent half a million shares (that means 500,000 shares). Values used for FCFF, and Market Value of Debt are in millions of dollars. An output of 2.01 means one share is valued at 2.01 dollars.
Value
Input values to five arguments FCFF, t, WACC, debtMV and shares.
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
shareValueGivenDebtMV(FCFF=c(0.4,0.4,0.4,0.4),t=c(1,2,3,4),WACC=0.12,debtMV= 0.21,shares=0.5)