Question

please complete all parts to the problem. added extra photos of the answer choices to choose from

10. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Tropetech Inc. has an expected net operating profit after taxes, EBIT(1-T), of $16,300 million in the coming year. In addition, the firm is expected to have net capital expenditures of $2,445 million, and net operating working capital (NOWC) is expected to increase by $50 million. How much free cash flow (FCF) is Tropetech Inc, expected to generate over the next year? $331,476 million $18,695 million $13,905 million $13,805 million

Answer 1

Free Cash Flow (FCF)

Free Cash Flow (FCF) = Net Operating Profit After Tax(NOPAT) – Capital Expenditures – Changes in Net Working Capital

=EBIT(1 – Tax Rate) - Capital Expenditures – Changes in Net Working Capital

= $16,300 Million - $2,445 Million - $50 Million

= $13,805 Million

Total Firm Value

Expected Growth Rate (g) = 3.54% per year

Weighted Average Cost of Capital (WACC) = 10.62%

Total Firm Value = FCF / (WACC – g)

= $13,805 Million / (0.1062 – 0.0354)

= $13,805 Million / 0.0708

= $194,985.88 Million

Value of Common Equity

Value of Common Equity = Total Firm Value – Market Value of Debt – Market Value of Preferred Stock

= $194,985.88 Million - $87,744 Million - $48,746 Million

= $58,495.88 Million

Intrinsic Value per share

Intrinsic Value per share = Intrinsic Value of Common Equity / Number of shares of common stock outstanding

= $58,495.88 Million / 750 Million shares outstanding

= $77.99 per share