1: Estimate the value of AEM and its equity from operations using the DCF method. Earlier in 2002, Agnico-Eagle Mines' stock price declined sharply by $1, finally closing at $13.89. This price has reached one of the lowest levels in the company's history. As a professional stock portfolio manager, who has a large number of AEM stocks. Acker and his team need to find a suitable way to estimate the fair value of AEM as well as its equity. Discounted Cash Flow (DCF) was chosen to do this work. The theory behind the DCF valuation approach is that the value of the business can be estimated using expected future free cash flows discounted by an appropriate discounted rate (Koller, etc., 2005). However, several assumptions need to be clearly examined within this approach. The following sections show the DCF process step by step.1.1 AEM valueFree cash flowUS$ 2001 2002 2003 2004 2005 2006 2007 2008FCF -779000 4281000 6832000 11097000 12625000 13131000 13 65 8000 14206000The first important component of DCF to estimate is the expected future Free cash flow of the company. However, Acker has already made an FCF prediction. The relevant data are estimated cash flows from 2002 to 2008, as well as actual FCF at the end of 2001. All figures in this report are in $ value: Weighted average cost of capital. The appropriate discounted rate should be used in the DCF approach. is the weighted average cost of capital. However, the prediction of the WACC has also already been made by Acker by applying the following equation: WACC= E/V Re + D/V Rd (1-Tc)E: value of equity Re= cost of equityD: value of debt Rd= cost of debtV=E+DHowever the ...... middle of paper ......f) 5.79% time until maturity (t) assume equal to T 16In( S / , this will add an additional $1929590819 to the value of the company. This value will be treated as a surplus asset, meaning it could have a significant effect on the equity value. In total, adjusted value of equity -105435887.7 + option value of unmined gold 1929590819 Fair value of equity 1824154932÷ Total number of shares 67722853 fair share price 26.93558896Clearly, the price The stock's current price of $13.89 is deeply undervalued. The fair market value of $26.94 was calculated including the tax shield, the on-balance sheet/off-balance sheet value and the value of unmined gold, however this result is based on a number of assumptions..