a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: (Click on the following icon in order to copy its contents into a spreadsheet.)
Year
FCF ($ millions)
1
53.0
2
68.0
3
78.0
4
75.0
5
82.0
After that, the free cash flows are expected to grow at the industry average of 4.0% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.0%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $ million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
The stock price per share will be $
(Round to two decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd976ec6a-9e52-4095-820c-15019c9a0024%2Fb9f08682-f42e-4e3c-9af3-5beb0c9cb8e2%2Fhltqg49_processed.png&w=3840&q=75)
Transcribed Image Text:Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: (Click on the following icon in order to copy its contents into a spreadsheet.)
Year
FCF ($ millions)
1
53.0
2
68.0
3
78.0
4
75.0
5
82.0
After that, the free cash flows are expected to grow at the industry average of 4.0% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14.0%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $ million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
The stock price per share will be $
(Round to two decimal places.)
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