Question

Marcellus wants to estimate the intrinsic value of Darlington Inc's common stock. Free cash flow (FCF) 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? $69.51 $63.01 $64.02 $42.49

please and thank you

Answer 1

Solution Y Expected free cash flow (FCF) = $13.25 million constant growth sate (g)= 2.50% of 2.50% 0g 0.0250 WACC 12.75 / of 0.1275 So, firstly, we will calculate value of from operation value of firm operations FCFI WACC- g 2 $ 13.25 million 0.1275 -0.0250 s $13.25 million 0.1025 $129.268293 million

value of Equity Value from's operation - long torm Debt & preferred stock outstanding $129.268293 million $25 million N $ 104,268293 million Intrinsic value per share ) Value of Equity Numbese of shares outstanding $104.268293 million W 1.5 million = $69.5121953 or $69.51 Answer =