In: Finance
If a company has the
following current Free Cash Flow and the additional information
provided, what is the price per share?
FCF Year 1 = $145,000
Expected growth rates
Yr 2: 12.70%
Yr 3: 14.10%
Yr 4: 9.60%
Yr
5: 10.25%
Yr 6: 8.40%
WACC 10.85%
ROE 18.15%
Plowback 38.00%
ST investments $86,000
LT Debt
$265,000
Pfd Stock
$32,000
# of shares 105,000
growth rate = 18.15%*0.38 = 6.897%
Discount rate | 10.8500% | ||
Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
- | 0 | - | - |
145,000.000 | 1 | 130,807.40 | 130,807.40 |
163,415.000 | 2 | 132,990.47 | 263,797.868 |
186,456.515 | 3 | 136,889.61 | 400,687.473 |
204,356.340 | 4 | 135,345.97 | 536,033.443 |
225,302.865 | 5 | 134,613.38 | 670,646.82 |
244,228.306 | 6 | 131,638.16 | 802,284.985 |
6,604,420.245 | 6 | 3,559,758.33 | 4,362,043.32 |
terminal value = 224,228.306*1.06897/(0.1085-0.06897)
value of firm = 4,362,043.32
value of equity = 4,362,043.32 - 86,000 - 265,000 - 32,000 = 3,979,043.32
value per share = 3,979,043.32/105,000 = 37.90