Question

Not sure if these answers are correct. please correct if wrong

5. More on the corporate valuation model Lex Corp. is expected to generate a free cash flow (FCF) of $12,030.00 million this year (FCF, - $12,030.00 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 Lex Corp.'s weighted average cost of capital (WACC) is 7.38%, what is the current total firm value of Lex Corp. (Note: Round all intermediate calculations to two decimal places.) $399,744.51 million $396,150.54 million $37,781.91 million $330,125.45 million Lex Corp.'s debt has a market value of $247,594 million, and Lex Corp. has no preferred stock. If Lex Corp. has 500 million shares of common stock Outstanding, what is Lex Corps estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places. 5412.56 $136.55 O $151.31 $137.55

Answer 1

Value of firm is equal to the present value of all future free cash flows

= 12,030/(1.0738) + 12,030(1.2020)/(1.0738)² + 12,030(1.2020)²/(1.0738)³ +12,030(1.2020)²(1.0246)/(1.0738)³ (7.38%-2.46%)

= $330,125.45 million

Less: Value of Debt = $247,594 million

Value of Equity= $82,531.45 million

Number of shares = 600 million

Intrinsic Value = $137.55