Start with the partial model in the file Ch08 P25 Build a Model.xlsx. Selected data for the Derby Corporation are shown here. Use the data to answer the questions. INPUTS (In Millions) Year Current Projected 0 1 2 3 4 Free cash flow -$15.0 $15.0 $60.0 $63.0 Marketable securities $30 Notes payable $100 Long-term bonds $300 Preferred stock $50 WACC 9.00% Number of shares of stock 50% Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. $ fill in the blank 2 million Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places. Present value of HV $ fill in the blank 3 million Present value of FCF fill in the blank 4 million Value of operations $ fill in the blank 5 million Calculate the estimated Year-0 price per share of common equity. Round your answer to the nearest cent.
Start with the partial model in the file Ch08 P25 Build a Model.xlsx. Selected data for the Derby Corporation are shown here. Use the data to answer the questions.
| INPUTS (In Millions) | Year | ||||||
| Current | Projected | ||||||
| 0 | 1 | 2 | 3 | 4 | |||
| -$15.0 | $15.0 | $60.0 | $63.0 | ||||
| Marketable securities | $30 | ||||||
| Notes payable | $100 | ||||||
| Long-term bonds | $300 | ||||||
| $50 | |||||||
| WACC | 9.00% | ||||||
| Number of shares of stock | 50% |
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Calculate the estimated horizon value (i.e., the value of operations at the end of the
forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.$ fill in the blank 2 million
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Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations. Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places.
Present value of HV $ fill in the blank 3 million Present value of FCF fill in the blank 4 million Value of operations $ fill in the blank 5 million -
Calculate the estimated Year-0 price per share of common equity. Round your answer to the nearest cent.
For computing the Horizon value at the end of Year 4, we consider the growth rate from year 3 to 4
Growth rate = (FCF4 - FCF3) / FCF3 *100 = (63-60)/60 * 100 = 5%
For computing the present value, the WACC of 9% will be considered.
The formula for the present value factor is = 1/(1+r)n , where r is the rate and n is the period.
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