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4.Conclusions
AbdulNafeaAlZararee,AbdulrahmanAl-Azzawi
ThispaperhasconfirmedtherelationshipbetweenFCFEandmarketvalueofthe
firm’shypothesis.Theconceptsofequityvaluationprojectedgrowth,requiredrate
ofreturnonequity,andanticipatedgrowthtodeterminethelong-termvalueofHik-
mafirm.Theequityvalueisstatedasthepresentvalueoftotalcashflowsfrom
Hikmafirmtotheequity.TheFirmValueistheFreeCashFlowtoEquitydividedby
thetotaloftherequiredrateofreturnforequityminustherateofthefirm’sreturns.
FCFEisstatedasnetincomeminusnetcapitalexpendituresminusthechangein
networkingcapitalplusthenetchangeinlong-termdebtfinancing.Therequiredrate
ofreturnforequityistakenfromHikmavaluationwhichispublishedbytheglobal
investmenthouseinJordan.OurfindingsuggeststhattheFCFEhypothesisdomina-
testhefirm’sstockreturn.Wealsofoundstrongsupportfortherelationshipbetween
FCFEandmarketvalueofHikmafirm.
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