Question

Use the following summary financial statement information and forecasts provided by TTU Value-Metrics to answer the valuation questions in this section about Hi-Flyer Corp. which has a December 31 fiscal year end.

(in thousands except per share data)	Actual	Estimated	Estimated	Estimated
	2017	2018	2019	2020
Net Income	225,000	200,000	215,000	230,000
Total Dividends Paid	48,000	20,000	25,000	30,000
Book Value of Equity	1,500,000
Total Liabilities	1,000,000
CFFO	400,000	150,000	200,000	250,000
CFFI	-250,000	-100,000	-200,000	-200,000
Dividends Per Share	0.48	0.20	0.25	0.30
Shares Outstanding (12/31/17)	100,000
Cost of Equity	0.14
Cost of Debt	0.08
WACC(at)	0.11

Using the above forecasts, determine the intrinsic value of High Flyer shares as at December 31, 2017. Use the discounted dividends model; assume the forecast dividend payment in 2021 is $0.35 and that it will growth by 8% per year in perpetuity. The appropriate intrinsic value (Model Price) at 12/31/2017 is

Answer 1

Discount rate	14.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
0.200	1	0.18	0.18
0.250	2	0.19	0.368
0.300	3	0.20	0.57
5.833	3	3.94	4.51

terminal value = 0.30/(0.14-0.08)

value per share = 4.51