FIRMS VALUATION
a. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. (PV of FCF + HV).
c. Calculate the estimated Year-0 price per share of common equity.
INPUTS (in million) YEAR
Current Projected
0 1 2 3 4
Free Cash Flow $80 $83.20 $86.52 $89.98 Marketable securities $20
Notes payable $150
Long-term bonds 100
Preferred stock $20
WACC 6%
Constant growth in FCF 4%
Number shares of stock 30
Financial Management
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Transcript
FIRMS VALUATION
a. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. (PV of FCF + HV). c. Calculate the estimated Year-0 price per share of common equity.
INPUTS (in million) YEAR Current Projected 0 1 2 3 4 Free Cash Flow $80 $83.20 $86.52 $89.98 Marketable securities $20 Notes payable $150 Long-term bonds 100 Preferred stock $20 WACC 6% Constant growth in FCF 4% Number shares of stock 30
Financial Management