Lazard estimated SolarCity's enterprise value as the present value of net cash flow for 2016 - 2020 plus a terminal value, assuming discount rate WACC of 10.5% and a perpetuity growth rate of 1.5%. SolarCity's equity value was then estimated by subtracting from enterprise value the face value of net debt (debt minus cash), $3.4 billion. SolarCity had 98.3 million shares outstanding. SolarCity management projections of net cash flow ($millions) in financially constrained case: FY 2016 FY2017 FY2018 FY 2019 161 290 454 499 FY2020 635 What is the stock price in the financially constrained case? • For simplicity, assume the valuation date is the beginning of fiscal year 2016 and all cash flows will be realized at the end of the corresponding fiscal year.

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Valuation of the target
Lazard estimated SolarCity's enterprise value as the present value of
net cash flow for 2016 - 2020 plus a terminal value, assuming
discount rate WACC of 10.5% and a perpetuity growth rate of 1.5%.
SolarCity's equity value was then estimated by subtracting from
enterprise value the face value of net debt (debt minus cash), $3.4
billion. SolarCity had 98.3 million shares outstanding.
●
SolarCity management projections of net cash flow ($millions) in
financially constrained case:
FY 2016 FY2017 FY2018 FY 2019
161
290
454
499
FY2020
635
• What is the stock price in the financially constrained case?
• For simplicity, assume the valuation date is the beginning of fiscal
year 2016 and all cash flows will be realized at the end of the
corresponding fiscal year.
Transcribed Image Text:Valuation of the target Lazard estimated SolarCity's enterprise value as the present value of net cash flow for 2016 - 2020 plus a terminal value, assuming discount rate WACC of 10.5% and a perpetuity growth rate of 1.5%. SolarCity's equity value was then estimated by subtracting from enterprise value the face value of net debt (debt minus cash), $3.4 billion. SolarCity had 98.3 million shares outstanding. ● SolarCity management projections of net cash flow ($millions) in financially constrained case: FY 2016 FY2017 FY2018 FY 2019 161 290 454 499 FY2020 635 • What is the stock price in the financially constrained case? • For simplicity, assume the valuation date is the beginning of fiscal year 2016 and all cash flows will be realized at the end of the corresponding fiscal year.
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