Question

3. ABC Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) in the first year is $20 million and FCF is expected to grow at a constant 7% rate after year 1. ABC's WACC is 12%. Suppose ABC has $12 million in marketable securities, $100 million in debt, 50 mission in preferred stocks, and 10 million shares of stock. What is the stock intrinsic price per share? (15 pts)

Answer 1

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12 e 59W 2 v D 02-23 ENG 28-02-2020 21 HQ95 HO HP HQ HR HS HT HU HV Formula Bar πνν HX HY HZ 20 ADD ( FORMULA = FCF3(1+g)/(ke-g) = 20(1+0.07)/(0.12-0.07)] YEAR -------------->>>>>>>>>>>>> FCF HORIZON VALUE TOTAL CASH FLOW PV FACTOR @ 12% PV OF NON-CONSTANT CF AND PV OF HORIZON VALUE 428 448 0.8929 400.00 103 104 105 400 107 VALUE OF OPERATIONS = ADD: NON OPERATING ASSETS VALUE OF COMPANY LESS: DEBT & PREFERRED STOCK VALUE OF EQUITY ANSWER CURRENT PRICE PER SHARE 100 + 50 = 12 412 150 262 26.20 (VALUE OF EQUITY/ NO OF SHARES) 109 262/10 = 112 113 114 115 ... FCF ARM, MSI.confidenceINDEX LOAN CURRENCY CROSS OVER GM HPR AM TAX HEDGING MONEY MARKET GROWTH SUST PREF AND DIV POLICY ... 1