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) |
51.351.3 |
69.269.2 |
76.376.3 |
73.173.1 |
80.780.7 |
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 14.8%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $312 million, and 42 million shares outstanding, estimate its share price.
WACC= | 14.80% | ||||||
Year | Previous year FCF | FCF growth rate | FCF current year | Horizon value | Total Value | Discount factor | Discounted value |
1 | 0 | 0.00% | 51.3 | 51.3 | 1.148 | 44.6864 | |
2 | 51.3 | 0.00% | 69.2 | 69.2 | 1.317904 | 52.50762 | |
3 | 69.2 | 0.00% | 76.3 | 76.3 | 1.512953792 | 50.43115 | |
4 | 76.3 | 0.00% | 73.1 | 73.1 | 1.736870953 | 42.08718 | |
5 | 73.1 | 0.00% | 80.7 | 801.62 | 882.32 | 1.993927854 | 442.50347 |
Long term growth rate (given)= | 4.30% | a. Value of Enterprise = | Sum of discounted value = | 632.22 | |||
Where | |||||||
Total value = FCF + horizon value (only for last year) | |||||||
Horizon value = FCF current year 5 *(1+long term growth rate)/( WACC-long term growth rate) | |||||||
Discount factor=(1+ WACC)^corresponding period | |||||||
Discounted value=total value/discount factor |
b
Enterprise value = Equity value+ MV of debt |
632.22 = Equity value+312 |
Equity value = 320.22 |
share price = equity value/number of shares |
share price = 320.22/42 |
share price = 7.62 |
Heavy Metal Corporation is expected to generate the following free cash flows over the next five...
Heavy Metal Corporation is expected to generate the following
free cash flows over the next five years:
FCF ($ million)
year 1 / 52.5
year 2 / 66.4
year 3 / 79.7
year 4 / 76.9
year 5 / 80.8
Thereafter, the free cash flows are expected to grow at the
industry average of 4.4 % per year. Using the discounted free cash
flow model and a weighted average cost of capital of 13.6 %:
a. Estimate the enterprise value...
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) 81.2 53.7 69.2 79.2 76.8 Thereafter, the free cash flows are expected to grow at the industry average of 4.1% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.2%: a. Estimate the enterprise value of Heavy Metal b. If Heavy Metal has no excess cash,...
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...
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) 51.9 68.7 77.3 73.9 80.6 Thereafter, the free cash flows are expected to grow at the industry average of 4.2 % per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.4 %: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no...
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) 51.9 67.7 76.9 73.3 83.1 Thereafter, the free cash flows are expected to grow at the industry average of 4.1 %4.1% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.5 %13.5%: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 3 4 5 FCF ($ million) 69.2 76.3 80.4 54.6 78.7 Thereafter, the free cash flows are expected to grow at the industry average of 4.1% 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...
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) 52.8 69.8 78.6 76.7 81.9 Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.5%: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash,...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF (S million) 52.6 67.2 79.9 76.7 83.5 Thereafter, the free cash flows are expected to grow at the industry average of 3.9% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.2%: a. Estimate the enterprise value of Heavy Metal b. If Heavy Metal has no excess cash,...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: L Year FCF ($ million) 1 52.2 2 66.9 3 76.8 4 74.9 5 80.4 Thereafter, the free cash flows are expected to grow at the industry average of 4.4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.1%: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year - 1 52.6 2 68.7 3 79. 6 4 7 6.8 5 81.7 FCF ($ million) Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.1% a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has...