Question

which of the following are correct (can be more than one)?

You expect Company A to generate the following free cash flows over the next five years:

Year	1	2	3	4	5
FCF ($ millions)	75	84	96	111	120

Beginning in year six, you estimate that Company A 's free cash flows will grow at 5% per year and that Company A's weighted average cost of capital is 15%

The enterprise value for Company A is $_____million.

If company A has $20 million of cash, $400 million of debt and 12 million shares of stock outstanding, then the price per share for Company A is $____

Answer 1

C184 X V fc =C183*1.05 - B A C 178 179 180 181 182 183 184 185 186 Free cash flows 1 Free cash flows 2 Free cash flows 3 Free cash flows 4 Free cash flows 5 Free cash flows 6 Firm value at year 5 75.00 84.00 96.00 111.00 120.00 126.00 $ 1,260.00 126/(15%-5%) D PVIF @ 15% 0.870 $ 0.756 $ 0.658 $ 0.572 $ 0.497 $ Present value 65.22 63.52 63.12 63.46 59.66 0.497 $ 626.44 187 Total PV of FCF Add: Cash 941.42 20.00 188 $ Firm value 189 190 $961.42 Less: Debt 400.00 191 Equity value 561.42 192 193 194 195 Number of shares 196 Stock price today $ 46.79

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