Heavy Metal Corporation is expected to generate the following free cash flows over the next five years
year |
1 |
2 |
3 |
4 |
5 |
FCF ($ million) |
53.4 |
69.6 |
76.7 |
76.8 |
83.3 |
Thereafter, the free cash flows are expected to grow at the industry average of 4.3% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.2 %
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $ 300 million, and 45 a million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $ million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of million, and million shares outstanding, estimate its share price.The stock price per share will be
$ (Round to the nearest cent.)
The enterprise value will be
=53.4/(1+13.2%)^1+69.6/(1+13.2%)^2+76.7/(1+13.2%)^3+76.8/(1+13.2%)^4+83.3/(1+13.2%)^5+((83.3*(1+4.3%))/(13.2%-4.3%))/(1+13.2%)^5
=771.13 million
The stock price per share will be
=(771.13-300)/45
=10.47
the above are the answers
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