How you can predict future evolution of value of shares
Could we suppose that, as we cannot predict the future evolution of the value of shares, a good estimation would be to consider this constant during the next five years?
Expert
Such affirmation is an error. The relation among the value of the shares of various years is: Et = Et-1 (1+Ket) – CFact. The shares value is constant (Et = Et-1) only when CFact = Et-1 Ket. It happens in non-growing perpetuities.
When computing the WACC, is the weighting of the shares done and the debt with book values of debt and shareholder’s equity or along with market values?
What would the future value after 5 years of $100 be at 10% compound interest?
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I need the answers for the midterm exam for FIN6000
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