Question

A company is projected to generate free cash flows of $800 million per year for the next 3 years (FCFF1, FCFF2 and FCFF3). Thereafter, the cash flows are expected to grow at a 1.5% rate in perpetuity. The company's cost of capital is 12.0%. The company owes $100 million to lenders and has $90 million in cash. If it has 150 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

Answer 1

C210 X ✓ fr =+C209*1.015 A B C F 206 207 $ 800 D E PVIF @ 12% Present value 0.893 $ 714.29 Millions 0.797 $ 637.76 Millions 0.712 $ 569.42 Millions 208 800 FCF 1 FCF 2 FCF 3 FCF4 Horizon value 209 800 210 211 $ 812 7,733 812/(12%-1.5%) 0.712 $ 5,504.43 Millions 212 213 Value of operations Less: Debt & Preferred 7,425.90 Millions 100.00 Millions 214 Add: Cash Add: Marketable securities 90.00 Millions Millions 215 216 217 218 219 Common stocks value - Number of shares I $ 7,415.90 Millions 150 Millions 220 221 Stock price 49.4 per share

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