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Question
Lambert Corporation reported net income of $60 million for last year. Depreciation expense totaled $20 million and capital expenditures came to $5 million. Free cash flow is expected to grow at a rate of 4.5% for the foreseeable future. Lambert faces a 40% tax rate and has a 0.45 debt to equity ratio with $185 million (market value) in debt outstanding. Lambert's equity beta is 1.25, the risk-free rate is currently 5% and the market risk premium is estimated to be 6.5%. What is the current total value of Lambert's equity (in millions)?A. $655.90
B. $731.20
C. $840.95
D. $951.26
E. $1,025.95
Answer
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