You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million shares outstanding. Your estimate of its cost of capital is 12%. You forecast that the company will generate free cash flows of $150 million and $200 million over the next two years, after which its free cash flows are projected to grow at stable rate in perpetuity. Projected terminal EV/FCFF exit multiple is 10. What is your estimate of its share value? Round to one decimal place.
You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million shares outstanding. Your estimate of its cost of capital is 12%. You forecast that the company will generate free cash flows of $150 million and $200 million over the next two years, after which its free cash flows are projected to grow at stable rate in perpetuity. Projected terminal EV/FCFF exit multiple is 10. What is your estimate of its 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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am. 123.
Transcribed Image Text:You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million shares outstanding. Your estimate of its cost of capital is 12%. You
forecast that the company will generate free cash flows of $150 million and $200 million over the next two years, after which its free cash flows are projected to grow at a
stable rate in perpetuity. Projected terminal EV/FCFF exit multiple is 10. What is your estimate of its share value? Round to one decimal place.
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