PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
15th Edition
ISBN: 9780137695621
Author: SMART
Publisher: PEARSON C
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Chapter 7, Problem 7.2STP

Learning Goal 5

ST7-2

Free cash flow valuation Erwin Footwear wishes to assess the value of its Active Shoe Division. This division has debt with a market value of S12.500.000 and no preferred stock Its weighted average cost of capital is 10%. The Active Shoe Division's estimated free cash flow each year from 2020 through 2023 is given in the following table. Beyond 2023 to infinity, the firm expects its free cash flow to grow at 4% annually.

Chapter 7, Problem 7.2STP, Learning Goal 5 ST7-2 Free cash flow valuation Erwin Footwear wishes to assess the value of its

a. Use the free cash flow valuation model to estimate the value of Envin's entire Active Shoe Division.

b. Use your finding in part a along with the data provided to find this division's common stock value.

c. If the Active Shoe Division as a public company will have 500.000 shares outstanding, use your finding in part b to calculate as value per share.

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