Question

In: Finance

Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer...

Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer price is a fair price. You decided to use discounted cash flow approach to value the company’s stock. You gathered the following data: Year FCF Other Data 2019 $600,000 Growth rate of FCF beyond 2023 = 3% 2020 $900,000 Weighted Average Cost of Capital (WACC) = 10% 2021 $1,400,000 The firm has no debt 2022 2023 $1,800,000 $2,500,000 Number of common shares outstanding = 1,000,000 a. Based on your valuation, what is the common stock per share? Is the stock worth buying? b. What is the common stock per share if the terminal growth rate (growth rate beyond 2023) were 5% instead of 3%?

Solutions

Expert Solution


Related Solutions

Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer...
Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer price is a fair price. You decided to use discounted cash flow approach to value the company’s stock. You gathered the following data: Year FCF Other Data 2019 $600,000 Growth rate of FCF beyond 2023 = 3% 2020 $900,000 Weighted Average Cost of Capital (WACC) = 10% 2021 $1,400,000 The firm has no debt 2022 2023 $1,800,000 $2,500,000 Number of common shares outstanding =...
Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer...
Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer price is a fair price. You decided to use discounted cash flow approach to value the company’s stock. You gathered the following data: Year FCF Other Data 2019 $600,000 Growth rate of FCF beyond 2023 = 3% 2020 $900,000 Weighted Average Cost of Capital (WACC) = 10% 2021 $1,400,000 The firm has no debt 2022 2023 $1,800,000 $2,500,000 Number of common shares outstanding =...
Suppose that Minecrafter goes public at the offer price of $22 per share. Minecrafter wishes to...
Suppose that Minecrafter goes public at the offer price of $22 per share. Minecrafter wishes to raise $10,000,000 net of all fees. The underwriting spread is 7% and listing fees are $1,000,000. Part One – IPO fees and overallotment option a) How many shares does Minecrafter need to issue in order to raise the required amount? b) What is the discounted price at which Minecrafters’ underwriter purchase the shares prior to resale at the offer price? c) Minecrafter’s IPO includes...
Jordan Broadcasting Company is going public at $47 net per share to the company. There also...
Jordan Broadcasting Company is going public at $47 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $31 million in earnings divided over 8 million shares. The public offering will be for 4 million shares; 2 million will be new corporate shares and 2 million will be shares currently owned by the founding stockholders. a. What is the immediate dilution...
Jordan Broadcasting Company is going public at $48 net per share to the company. There also...
Jordan Broadcasting Company is going public at $48 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $30 million in earnings divided over 10 million shares. The public offering will be for 6 million shares; 3 million will be new corporate shares and 3 million will be shares currently owned by the founding stockholders. a. What is the immediate dilution...
If you were Joseph Wierda (BMW), what criteria would you use to decide whether to offer...
If you were Joseph Wierda (BMW), what criteria would you use to decide whether to offer video streaming for the X5 model?
You are bullish on Telecom stock. The current market price is $30 per share, and you...
You are bullish on Telecom stock. The current market price is $30 per share, and you have $6,000 of your own to invest. You borrow an additional $6,000 from your broker at an interest rate of 7% per year and invest $12,000 in the stock.    a. What will be your rate of return if the price of Telecom stock goes up by 5% during the next year? The stock currently pays no dividends. (Negative value should be indicated by...
______     8.      Assume the offer price for an IPO is set at $25 per share and...
______     8.      Assume the offer price for an IPO is set at $25 per share and the shares issued in the IPO is 10 million. The lead underwriter, however, sells 11.5 million shares to investors at the $25 offer price, planning to use the overallotment option, if needed, to satisfy its short position. Assume that the IPO firm’s stock starts trading on the stock exchange at either $23 per share or $27 per share. In which of these two possible...
You are a frequent flyer and you have been wondering whether the number of flights delayed...
You are a frequent flyer and you have been wondering whether the number of flights delayed is influenced by how busy the airport is that you are flying into. You have collected data for the number of delayed flights and the total number of flights on the airport at your hometown on 20 consecutive days and the data are presented below: Day Total Number of Flight Number of Flights Delayed 1 490 42 2 494 47 3 510 60 4...
Income Statement for Fiscal Years Endings (in Millions, except per share amounts) Report Date 06/30/2019 06/30/2018...
Income Statement for Fiscal Years Endings (in Millions, except per share amounts) Report Date 06/30/2019 06/30/2018 06/30/2017 Net sales $67,684 $66,832 $65,058 Cost of products sold 34,768 34,268 32,535 Gross profit $32,916 $32,564 $32,523 Selling, general & administrative expense 19,084 18,853 18,568 Goodwill & indefinite lived intangible asset impairment charges 8,345 0.00 0.00 Operating income $5,487 $13,711 $13,955 Interest expense 509 506 465 Interest income 220 247 171 Other non-operating income (expense), net 871 -126 -404 Earnings from continuing operations...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT