Widget Corp. is expected to generate a free cash flow (FCF) of $12,370.00 million this year (FCF₁ = $12,370.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Widget Corp.’s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Widget Corp.? (Note: Round all intermediate calculations to two decimal places.)
Widget Corp.’s debt has a market value of $153,778 million, and Widget Corp. has no preferred stock. If Widget Corp. has 600 million shares of common stock outstanding, what is Widget Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.)
SHOW WORK PLEASE
I have answered the question below
Please up vote for the same and thanks!!!
Do reach out in the comments for any queries
Answer:
FCF1=12370 MILLION
FCF2=(12370*1.262)=15610.94 million
FCF3=(15610.94*1.262)=$19701.00 million
Value after year 3=(FCF 3*Growth rate)/(WACC-Growth rate)
=(19701*1.0426)/(0.1278-0.0426)=$241082.894 milllion
Hence current total firmvalue=Future FCF*Present value of discounting factor(12.78%,time period)
=12370/1.1278+15610.94/1.1278^2+19701/1.1278^3+241082.894/1.1278^3
=$205037.7283 million(Approx)
Intrinsic value=(Total value-Debt)/Shares outstanding
=(205037.7283-153,778)/600
=85.432 (Approx).
Widget Corp. is expected to generate a free cash flow (FCF) of $12,370.00 million this year...
Widget Corp. is expected to generate a free cash flow (FCF) of $7,555.00 million this year (FCF₁ = $7,555.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Widget Corp.’s weighted average cost of capital (WACC)...
Globex Corp. is expected to generate a free cash flow (FCF) of $140.00 million this year (FCF, = $140.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF.). Assume the firm has no nonoperating assets. If Globex Corp.'s weighted average cost of capital (WACC)...
Acme Corp. is expected to generate a free cash flow (FCF) of $4,820.00 million this year (FCF1 = $4,820.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF2 and FCF2). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF4). Assume the firm has no nonoperating assets. If Acme Corp.'s weighted average cost of capital (WACC)...
Extensive Enterprise Inc. is expected to generate a free cash flow (FCF) of $11,610.00 million this year (FCF $11,610.00 million), and the FCF is expected to grow at a rate of 26.20 % over the following two years (FCFa and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26 % per year, which will last forever (FCFa). Assume the firm has no nonoperating assets. If Extensive Enterprise Inc.'s weighted average cost...
Luthor Corp. is expected to generate a free cash flow (FCF) of $14,950.00 million this year (FCF, - $14,950.00 million), and the FCF is expected to grow at a rate of 23.80% over the following two years (FCF, and FCF). After the third year, however, the FCF is expected to grow at a constant rate of 3.54% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Luthor Corp.'s weighted average cost of capital (WACC)...
Acme Corp. is expected to generate a free cash flow (FCF) of $2,840.00 million this year (FCF₁ = $2,840.00 million), and the FCF is expected to grow at a rate of 25.00% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 3.90% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Acme Corp.’s weighted average cost of capital (WACC)...
Globex Corp. is expected to generate a free cash flow (FCF) of $3,775.00 million this year (FCF1 = $3,775.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years (FCF, and FCF). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Globex Corp.'s weighted average cost of capital (WACC)...
Acme Corp. is expected to generate a free cash flow (FCF) of $12,710.00 million this year (FCF1 = $12,710.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years (FCF and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Acme Corp.'s weighted average cost of capital (WACC)...
Lex Corp. is expected to generate a free cash flow (FCF) of $7,520.00 million this year (FCF1 = $7,520.00 million), and the FCF is expected to grow at a rate of 21.40% over the following two years (FCF, and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 2.82% per year, which will last forever (FCFA). Assume the firm has no nonoperating assets. If Lex Corp.'s weighted average cost of capital (WACC)...
1) Globex Corp. is expected to generate a free cash flow (FCF) of $9,640.00 million this year (FCF₁ = $9,640.00 million), and the FCF is expected to grow at a rate of 25.00% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 3.90% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Globex Corp.’s weighted average cost of capital...