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In: Finance

Micro Bike Company has short term investments of $50, debt of $1,500, and preferred stock of...

Micro Bike Company has short term investments of $50, debt of $1,500, and preferred stock of $200. The equity of the Micro Bike has 100 shares. The company forecasts the following:

2015 2016 2017 2018
Free Cash Flow $30 $90 $130 $210 $220
Target WACC 10% 10% 10% 10% 10%
Free Cash Flow Growth 15% 200% 44.4% 61.5% 4.8%

a. What is the Present Value of Free Cash Flows?

b.What is the Present Value of the Horizon Value?

c. What is the estimated intrinsic value of the equity?

d. What is the estimated intrinic stock price?

plase show work ( the last colums is year 2019)

Solutions

Expert Solution

Discount rate 10.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
                            -   0                                            -                                           -  
                   30.000 1                                     27.27                                  27.27
                   90.000 2                                     74.38                                101.65
                 130.000 3                                     97.67                                199.32
                 210.000 4                                   143.43                                342.76
             4,232.308 4                               2,890.72                            3,233.48

a. 342.76

b. 2890.72

c. (3233.48 - 50 - 1500) = 1683.48

d. 16.83

jeff jeffy answered 1 year ago
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