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ABC plc. Had the following statement of cash flows ($ millions) for 2013. The statement of cash flows included interest payments of $1,084 million under

ABC plc. Had the following statement of cash flows ($ millions) for 2013. The statement of cash flows included interest payments of $1,084 million under "cash flow from operations". The tax rate is 26 per cent. What is the free cash flow to the firm?

Cash flow from operations 21,100

Cash flow from investing activities -7,855

Cash flow from financing activities -10,400

If the discount rate for ABC is 12 per cent and the company's cash flows are expected to grow at 3 per cent every year. ABC has 10,000 million outstanding shares in 2013. What was the price of ABC share?

Expert Solution

Free cash flows to the firm - $3,126.84 million

Calculationi of free cashflows to the firm:

Particulars million

(a) Cash flow from operation 21,100

(b) Cash flow froom inserting activites (7,855)

(c) Cash flow from financing activities (10,900)

Increase (decreae) in cashflows 2,845

Calculation g price of ARC Share:

= Firm's value / Total number of shares outstanding

= $35, 784.95 million / 10,000 million

= $2.578 (approximately)

Therefore, ARC's shame price = $3.578.

Umair answered 2 years ago

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