Fcfe

WHY ARE DIVIDENDS DIFFERENT FROM FCFE? The FCFE is a measure of what a unwavering can afford to pay by as dividends. Dividends paid are different from the FCFE for a number of reasons - believe for Stability Future Investment Needs Tax Factors Signalling Prerogatives I. THE unending GROWTH FCFE MODEL The Model The value of equity, under the everlasting growth model, is a function of the expected FCFE in the adjoining period, the stable growth prescribe and the required rate of return. P0 = where, P0 = nourish of stock today FCFE1 r ? gn 1 FCFE1 = Expected FCFE next course r = Cost of equity of the firm gn = Growth rate in FCFE for the firm forever This model is appropriate when The firm has to be in steady state. This also implies that. (1) Capital white plague is not significantly greater than depreciation. (2) The beta of the stock is closing to one or below one. The firm has FCFE which are significantly different from dividends, or dividends are not relevant. The leverage is stable. typification 7: FCFE Stable Growth Model: Telefonica de Espana Rationale for exploitation Model Given that the market that is serves (Spain) is reaching maturity (40.5 yell lines per 100 people), and the regulations on local pricing, it is unlikely that Telefon. Espana will be able to register above-normal growth.

It is expected to grow about 10% a year in Spanish peseta terms. Telefonica pays out much less in dividends than it generates in FCFE. Dividends in 1995 = 54 Pt / parcel 2 FCFE per luck in 1995 = 86.53 Pt / share The leverage is stable Background Information Current Information: Earnings per voice = 154.53 Pt Capital Expenditures per share = 421 Pt dispraise per share = 285 Pt Change in Working Capital / Share = None Debt Financing Ratio = 50% Earnings, Capital Expenditures and Depreciation are all expected to grow 10% a year The beta for the stock is 0.90, and the Spanish long alliance rate is 9.50%. A premium of 6.50% is used for the Spanish... If you want to procure a full essay, order it on our website: Orderessay

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