You are valuing Soda City Inc. It has $114 million of debt, $84 million of cash,...

You are valuing Soda City Inc. It has $114 million of debt, $84 million of cash, and 164 million shares outstanding. You estimate its cost of capital is 11.6%. You forecast that it will generate revenues of $711 million and $789 million over the next two years. Projected operating profit margin is 26%, tax rate is 27%, reinvestment rate is 31%, and terminal exit value multiple at the end of year 2 is 13. What is your estimate of its share price? Round to one decimal place. [Hint: Compute projected FCFF for years 1 and 2 based on info provided, compute terminal value using the exit multiple method, discount it all to find EV, walk the bridge to Equity, divide by number of shares outstanding.]

Expert Solution

jeff jeffy answered 6 months ago

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash,...

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash, and 154 million shares outstanding. You estimate its cost of capital is 12.6%. You forecast that it will generate revenues of $703 million and $797 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 21%, tax rate is 29%, reinvestment rate is 23%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash,...

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash, and 154 million shares outstanding. You estimate its cost of capital is 12.6%. You forecast that it will generate revenues of $703 million and $797 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 21%, tax rate is 29%, reinvestment rate is 23%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash,...

You are valuing Soda City Inc. It has $104 million of debt, $89 million of cash, and 154 million shares outstanding. You estimate its cost of capital is 12.6%. You forecast that it will generate revenues of $703 million and $797 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 21%, tax rate is 29%, reinvestment rate is 23%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $107 million of debt, $87 million of cash,...

You are valuing Soda City Inc. It has $107 million of debt, $87 million of cash, and 157 million shares outstanding. You estimate its cost of capital is 12.3%. You forecast that it will generate revenues of $706 million and $794 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 23%, tax rate is 29%, reinvestment rate is 26%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $132 million of debt, $77 million of cash,...

You are valuing Soda City Inc. It has $132 million of debt, $77 million of cash, and 182 million shares outstanding. You estimate its cost of capital is 9.8%. You forecast that it will generate revenues of $726 million and $774 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 33%, tax rate is 24%, reinvestment rate is 46%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $132 million of debt, $77 million of cash,...

You are valuing Soda City Inc. It has $132 million of debt, $77 million of cash, and 182 million shares outstanding. You estimate its cost of capital is 9.8%. You forecast that it will generate revenues of $726 million and $774 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 33%, tax rate is 24%, reinvestment rate is 46%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $110 million of debt, $90 million of cash,...

You are valuing Soda City Inc. It has $110 million of debt, $90 million of cash, and 140 million shares outstanding. You estimate its cost of capital is 12.4%. You forecast that it will generate revenues of $700 million and $800 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 20%, and the tax rate is 30%. Each year, deprecation is $4mm and capital expenditures including the...

You are valuing Soda City Inc. It has $110 million of debt, $90 million of cash,...

You are valuing Soda City Inc. It has $110 million of debt, $90 million of cash, and 140 million shares outstanding. You estimate its cost of capital is 12.4%. You forecast that it will generate revenues of $700 million and $800 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 20%, tax rate is 30%, reinvestment rate is 20%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash,...

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end...

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash,...

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end...

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You are valuing Soda City Inc. It has $114 million of debt, $84 million of cash,...

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