Question

IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2013 you initiate discussions with IDX's founder about the possibility of acquiring the business at the end of 2013. Estimate the value of IDX per share using a discounted FCF approach and the following data: • Debt: $40 million • Excess cash: S120 million • Shares outstanding: 50 million • Expected FCF in 2014: $45 million • Expected FCF in 2015: $60 million • Future FCF growth rate beyond 2015: 5% • Weighted average cost of capital: 9.4% The enterprise value in 2013 is 5 million. (Round to the nearest integer.) The equity value is $ million. (Round to the nearest integer.) The value of IDX per share is $7 (Round to the nearest cent.)

Answer 1

ANSWER

Answer b.

Terminal Enterprise Value = $60 million / (0.094 - 0.050)
Terminal Enterprise Value = $1,363.6 million

Enterprise Value = $45 million / 1.094 + $1,363.6 million / 1.094
Enterprise Value = $1,287.57 million

Answer c.

Equity Value = Enterprise Value + Excess Cash - Debt
Equity Value = $1,287.57 million + $120 million - $40 million
Equity Value = $1,367.57 million

Answer d.

Value per share = Equity Value / Shares outstanding
Value per share = $1,367.57 million / 50 million
Value per share = $ 27.35

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