A company is projected to generate free cash flows of $150 million next year and $210 million at the end of year 2, after which it is projected grow at a steady rate in perpetuity. The company's cost of capital is 8.0 %. It has $200 million worth of debt and $40 million of cash. There are 30 million shares outstanding. If the terminal EV/FCFF exit multiple at the end of year 2 is 4.0, what's your estimate of the company's share value? Round to one decimal place.
A company is projected to generate free cash flows of $150 million next year and $210 million at the end of year 2, after which it is projected grow at a steady rate in perpetuity. The company's cost of capital is 8.0 %. It has $200 million worth of debt and $40 million of cash. There are 30 million shares outstanding. If the terminal EV/FCFF exit multiple at the end of year 2 is 4.0, what's your estimate of the company's share value? Round to one decimal place.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company is projected to generate free cash flows of $150 million next year and $210 million
at the end of year 2, after which it is projected grow at a steady rate in perpetuity. The
company's cost of capital is 8.0 %. It has $200 million worth of debt and $40 million of cash.
There are 30 million shares outstanding. If the terminal EV/FCFF exit multiple at the end of
year 2 is 4.0, what's your estimate of the company's share value? Round to one decimal place.
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