Question

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Question 3 8.54 pts Marcellus wants to estimate the intrinsic value of Darlington Inc's common stock. Free cash flow (FCFy) for this year is expected to be $13.25 million, and it is expected to grow at a constant rate of 2.50% a year thereafter. The company's WACC is 12.75%, it has $25.0 million of long-term debt plus preferred stock outstanding, and there are 1.5 million shares of common stock outstanding. Assume the value of any non-operating assets (like excess cash balances) is zero. Based on this data, what is the firm's estimated intrinsic value per share of common stock? O $4249 $69.51 $63.01 $64.02 Question 4 8.55 pts Calculate the price of Barrett James Corp's common stock with the Dividend Growth Model given that dividends were $3.60 last year, are expected to grow 4.50% per year for the foreseeable future, and investors' required return is 17%. Calculate to 4 decimal places. $29.75 $28.80 $30.90 $30.10

Answer 1

Ques-3)

FCF1 = $13.25 million

FCF Growth rate each year therafter(g) = 2.50%

WACC = 12.75%

Calculating the Firm's Value or Enterprise Value:-

$Enterprise Value =\frac{FCF_1}{(WACC-g)}$

$Enterprise Value =\frac{13.25 million}{(0.1275-0.025)}$

Enterprise Value = $129.2683 million

Enterprise Value = Value of Equity + Value of Debt plus preferred Stock

$129.2683 million = Value of Equity + $25 million

Value of Equity = $104.2683 million

Value per share of Equity = Value of Equity/No of shares outstanding

= $104.2683/1.5 million shares

= $69.51 per share

Option 2

Ques-4)

Calculating the Current Price of Stock using Dividend Growth Model:-

Price Do(1+9) (Ke-9)

where, D0 = $3.60

g = Long-term growth rate = 4.50%

Ke = required rate of Return = 17%

$Price = \frac{3.60*(1+0.045)}{(0.17-0.045)}$

Price = $30.10

So, Current Stock Price is $30.10

Option 4

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