Explain how to use FCF evaluation model to find the price per share of common equity.
Explain how to use FCF evaluation model to find the price per share of common equity.
Homework Answers
FCF model is used to find the value of business by discounting the future cash flows of the business. Thus the FCF next year is discounted by the required rate of return to arrive at the total business value. The value of debt is subtracted from the Business value to get value of equity. This value is then divided by the number of shares to arrive at the price per share.
Example: The total business value= FCF1/ (WACC-growth)
=$100/(10%-6%)
= $2500
If the value of debt is $500, value of equity= 2500- 500 = $2000
Value of equity divided by the number of shares will give the price per share.
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Explain how to use FCF evaluation model to find the price per
share of common equity.
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Change in interest =46.7%
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a. The value of CoolTech’s entire company is ...
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c. If the growth rate in FCF beyond 2023 will be 6%, the value
of CoolTech’s entire company will be...
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Using the free cash flow valuation model to price an IPO Personal Finance Problem Assume that you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for...
Find NOPAT, NOWC, NFA, TOC, FCF,
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BV/SHARE, P/E, M/B, N?
NOTE:
Change in sales = 5%
Change in op.costs= 5%
Change in interest =46.7%
Change in net income= -3.6%
MICRO DRIVE INC.BALANCE SHEETS (mil $) ASSETS YEAR 2 YEAR 1 LIABILITIES AND EQUITY YEAR 2 YEAR 1 10 30 Cash and Equivalents Short Term Investments Accounts Receivable Inventories Total Current Assets 375 615 1000 65 315 415 Accounts Payable Notes Payable Accruals...
Calculate the price per share of common equity as of
12/31/2018.
Millions except price per share
Actual
2018/12/31
Value of operations (V0)
+ Value of short-term investments
Total value of company
− Total value of all debt
− Value of preferred stock
Value of common equity
Number of shares outstanding
Price per share
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