ABC Corp is a manufacturing company with the following information: 1, Financial Statements: Net Income: $10 million Depreciation: 55 million Capital Expenditures (CapEx): $8 million Changes in Working Capital. $2 million (increase) 2. Balance Sheet Total Debt: $40 million (long-term debt) Total Equity: $60 million Total Assets $100 million 3. Market information: Risk Free Rate: 3% Market Risk Premium: 5% Comparable Companies Unlevered Beta 1.0 (overage of industry peers) Tax Rate: 30% Current Stock Price: $25 per share Number of Shares Oustanding 4 million 4. Assumptions: Terminal Growth Rate: 5% Long-term WACC: 0.25% less than the Initial WACC Questions: a. Calculate the Free Cash Flow to the Firm (FCFF) for ABC Corp for the next five years. b. Determine the Cost of Equily using the Capital Asset Pricing Model (CAPM) with unleverted bela. c. Cakulate the Levered Beta for ABC Corp by using the industry average unlovered beta and the company's capital structure d. Calculate the Cost of Equity using the Capital Asset Pricing Modiel (CAPM) with the calculated levered beta. c. Calculate the Weighted Average Cost of Capital (WACC) for ABC Corp using the icvered beta f. Use the DCF valuation formula to estimate the intrinsic value per share for ABC Corp for the next five years, considering the calculated levered beta, g Add the terminal value to the DCF valuation using the Gordon Growth Model with a terminal growth rate of 5%. h. Calculate the present value of the terminal value using the long-term WACC (0.25% less The initial WACC). i. Sum the present values of the FCFF and terminal value to get the intrinsic value per share
ABC Corp is a manufacturing company with the following information: 1, Financial Statements: Net Income: $10 million
terminal value to get the intrinsic value per share
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