You are valuing a company that is projected to generate a free cash flow of $39 million next year, growing at a stable 1.9% rate in perpetuity thereafter. The company has $34 million of debt and $6 million of cash. Cost of capital is 12.9%. There are 21 million shares outstanding. How much is each share worth according to your valuation analysis? Round to one decimal place.
rate positively ..
Firstly we have to compute the value of firm | ||||||||
Value of firm = | Free cash flow next year /(required rate - growth rate) | |||||||
39/(12.9%-1.9%) | ||||||||
354.55 | million | |||||||
Secondly, we have compute the equity value | ||||||||
Value of firm = | 354.55 | million | ||||||
Less: Debt = | -34 | million | ||||||
Add: Cash = | 6 | million | ||||||
A | Value of equity | 326.55 | million | |||||
B | Number of share = | 21 | million | |||||
C=A/B | Price per share = | 15.55 | ||||||
Ans = | $ 15.55 | |||||||
You are valuing a company that is projected to generate a free cash flow of $39...
You are valuing a company with free cash flows expected to grow at a stable 1.9% rate in perpetuity. Analysts are forecasting free cash flows of $39 million for next year (FCFF1). The company has $34 million of debt and $6 million of cash. Cost of capital is 12.9%. There are 14 million shares outstanding. How much is each share worth according to your valuation? Round to one decimal place.
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